There are no compelling reasons yet for Zimbabwe to increase the number of gold authorised refiners because its bullion output still falls far short of the minimum thresholds required to sustain the profitability of multiple refinery operators.
This, though comes against the background that the only refinery in the country has at times failed to offer globally competitive prices or settle deliveries for cash, prompting smuggling.
It is believed that Zimbabwe loses millions of United States dollars each year through gold smuggling.
Zimbabwe produced 21,44 tonnes of gold in 2016, 24,44 tonnes in 2017, 33,89 tonnes in 2018, 27,589 tonnes in 2019, and 19,05 tonnes last year. Lack of formalisation seriously affected production and deliveries from small and artisanal miners in 2020.
Fidelity Printers and Refiners (FPR), Zimbabwe’s sole authorised gold buyer, chief executive Fraderick Kunaka said Zimbabwe has never reached the minimum output for profitability of 50 tonnes.
However, he said the mineral rich Southern African nation has made the initial steps towards bringing in private players into gold refining after the Government initiated partial privatisation of FPR.
The Government has started the process to privatise the gold refining business which will see, both large and small producers acquiring shares in FPR based on their shares of annual bullion deliveries.
A unit of the Reserve Bank of Zimbabwe (RBZ) FPR will be unbundled into two business units, gold refinery and printing and minting.
The RBZ said the unbundling of FPR is designed to partially privatise the gold refining business by allowing private players to acquire a stake therein and in the process secure and endear the private sector’s interests in the production and marketing of gold in Zimbabwe.
Accordingly, the central bank shall retain 40 percent shareholding in FPR and dispose of 60 percent shareholding to both the large-scale and small-scale gold producers.
Using a three-year average delivery of gold to FPR, the bank will offer 50 percent shares in FPR to large-scale producers, 3 percent to major FPR gold buying agents and the balance of 7 percent to small-scale producers through their representative bodies.
Small and artisanal gold miners account for about 60 percent of bullion output in Zimbabwe while the balance comes from large-scale miners.
Globally, Mr Kunaka said, gold production has not increased markedly, continuing to hover around 3 000 tonnes, yet multiple refining licences have been issued.
“You would find that based on the process that you are you using, you find that there is a minimum threshold that you need to be able handle to operate viably.
“So, in terms of the technology that we are using (in Zimbabwe), you need to be operating at a minimum of 50 tonnes per annum, which we have not achieved since inception.
“That calls for the question; is it necessary to bring in additional refineries given that the one that we have we are not fully utilising it.
“What it means is that even when we bring these (additional refineries), it means someone must be subsidising their operations because they will be far lower, in terms of their capacity utilisation, than the threshold (required),” he said.
The Fidelity Printers and Refiners boss said given that the highest output that Zimbabwe has ever achieved was 33 tonnes, the country needed to ramp up output multi-fold to sustain just two refineries.
“So, you would look at it and say ‘What exactly would we be trying to address (by adding refineries)?’, if the country can process all its gold through a single plant.”
Besides the issue of tonnage required to profitably run and sustain a gold refinery, Mr Kunaka said a multiplicity of licences increases loopholes for entry of smuggled gold into the country, which creates problems.
The comments come after reports that leading gold producers on the continent, Ghana and South Africa had dished out refining licences over the last two years to private players.
Gold is one of Zimbabwe’s single largest export earners, accounting for about 30 percent of annual foreign currency earnings. Mineral earnings though account for over three quarters of the country’s total foreign currency earnings. Sunday Mail