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Gold deliveries dip 29%

Zimbabwe’s gold deliveries fell 29.2% to 17.59 tonnes during the 11 months of 2020 from 24.88 tonnes recorded during the same period as payments delays fuel smuggling of the yellow metal.

The dip in deliveries of gold will affect Zimbabwe’s foreign currency earnings as the yellow metal accounts for more than a third of total export receipts.

Gold deliveries started well during the first three months of the year and coincidentally the decline started in April during the strict lockdown period due to the shortages of raw materials which could not be shipped at the peak of the lockdown.

However, from June going forward the mining sector was given an essential service status with miners allowed to operate and import essential consumables for their activities.

In July, all hell broke loose after the small scale miners who were granted 100% United States dollar payment could spend up to eight weeks without payment and this heightened the smuggling pace around the country.

FPR general manager Fradreck Kunaka told Business Times that the bullion sector was affected by Covid-19 most part of the year making it difficult for miners to get early payments due to complexities involved in bringing in US dollars during the pandemic period.

“During the month of November gold deliveries declined 20% to record 1.48 tonnes from 1.84 tonnes recorded during the same month last year,” Kunaka said.

This year, the Meteorological Services Department has predicted normal to above rainfall patterns, a situation which is good for agriculture and bad for mining as some shaky mines are prone to collapse.

“The rainy season has always hampered the operations of artisanal and small scale miners in their gold production as evidenced by the decline in gold deliveries during this time of the year,” Kunaka said.

Gold Miners Association of Zimbabwe chief executive Irvine Chinyenze said gold deliveries were bound to fall down as delay in payment will force a miner to look for an alternative market where payments are instant.

“We have said it and we always said that as long as RBZ continues with its delay in payments, gold deliveries and export receipts will not improve as miners will look for an alternative market to capitalise and continue producing,” Chinyenze said.

 “The political figures and powerful business people who are against the idea of ending Fidelity monopoly are the ones providing alternative markets. They should become frank with themselves to stop that rot as long as they control these syndicates the anti-smuggling unit is toothless.”

He said the central bank would have come up with more incentives to boost the sector, given the effects of the Covid-19 pandemic.

Cumulatively, the country’s bullion export receipts retreated 23% to reach US$697m in the first 10 months of the 2020 from US$906.7m earned during the same period last year.

Zimbabwe was on track during the first half of the year when the country’s export earnings for the half year went up 2.6%  to US$476.2m  from US$464m earned during the same period last year due to the review of foreign currency retention threshold and increased fuel allocations this year.

However, rampant smuggling began in July when Fidelity delays in payments took up to eight weeks forcing miners to opt for alternative markets.

Kunaka said FPR endeavoured to pay “our clients for all deliveries they would have made” adding that there have been some payment delays due to “circumstances beyond our control”.

“However, we have managed to reduce the delay to less than five days and in some instances have been able to pay on the spot.”

“It is our desire to pay on the spot and with the easing of lockdown measures on flights, the situation should significantly improve. This will see us clearing the backlog of all pending payments and being up to date consistently,” he said. 

Chamber of Mines of Zimbabwe chief executive Isaac Kwesu said last month the fall in gold deliveries was inevitable due to the fact that production cycle is disturbed due to delay in payments hence there is no working capital to support production.

Mining experts say the government should give artisanal mining cooperatives legal standing, pay gold producers at world prices and strengthen mining dispute resolution.

The FPR was blamed in a recent report on Zimbabwe’s gold subsector, for a flawed centralised gold buying scheme and called for the law to bring complicit powerful politicians to book as they are believed to be sponsors of machete gangs’ violence in Midlands and Mazowe.

 The report said the development of the gold sector is crucial if the government is to salvage prospects for Zimbabwe’s economic recovery from decades of economic stagnation.

Gold world prices have not dropped radically during the worldwide pandemic as the yellow metal prices ranged between US$53,000 per kilogramme to US$63,000 per kilogramme during the reported time.

When the world gold prices are around US$61,000 FPR pays gold producers between US$45,000per kg and US$53,000 per kg, a practice that encourages smuggling and erodes industrial mining profits, leading companies to close mines.

Idle industrial mines have become targets for intrusion by artisanal miners.

Despite beefing up mineral anti-smuggling taskforces, gold still finds its way out as bigwigs are the leaders of gold smuggling syndicates.

Experts suggested that established mining companies with huge capital have dominated this year’s deliveries due to lack of movement from the small scale miners.

Zimbabwe is targeting 100 tonnes of gold per year by 2023, a figure which is expected to help the sector to earn US$12bn yearly.  Gold is expected to lead the charge with US$4bn.

SOURCE – BusinessTimes

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