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Fidelity unbundling delay rattles investors

Delays in the proposed unbundling of Fidelity Printers and Refiners (FPR) has rattled investors who are now reluctant to fund gold projects without proper knowledge of the timelines of the privatisation processes, an executive with the company has warned.

The delays have significantly contributed to the decrease in gold deliveries as investors are not happy with the continuous participation of FPR as a player.

Consequently, the miners are now taking their gold to alternative markets.

“Unbundling is still work in progress and as such it tends to affect investor participation in businesses wherein FPR is a player,” FPR general manager Fradreck Kunaka said.

Last year, the Reserve Bank of Zimbabwe (RBZ), which is the parent company of FPR, announced plans to unbundle the company into two units—gold refining and printing and minting units.

RBZ said it would retain the printing and minting business but dispose of it 60% shareholding in the gold refining unit.

The big mining houses have been offered a 50% stake, while the small-scale miners and FPR gold buying agents were offered 7% and 3% respectively.

The proposal follows the model of Rand Refinery, South Africa’s biggest refinery, which is owned by the five largest gold miners—AngloGold Ashanti, Gold Fields, Harmony, Sibanye Gold and DRDGOLD.

But, it appears there is no progress in the proposed unbundling of FPR, a move which has affected investors.  Early this year, RBZ governor, John Mangudya said the Covid-19 pandemic had stalled the process as board members of mining houses could not meet to complete the processes.

Gold deliveries fell 5% to record 1.38 tonnes in April 2021 from 1.46 tonnes recorded in the prior comparative period due to unfavourable mining policies   and smuggling.

Kunaka said the authorities should complete the proposed unbundling process to attract investors in the gold sector.

“Without fresh capital injection, gold production may continue to decline or hold at current levels of 1.3 tonnes per month,” Kunaka said.

RBZ was expecting that the gold producers’ compliance levels in the trading of gold will significantly increase as they will be part of the decision-making process in gold trading.

The proposed privatisation of FPR came after some lobbying from some players in the mining business.

Gold miners want Zimbabwe to fully liberalise the marketing of gold so as to allow miners to sell their own production, a suggestion that Mangudya has publicly opposed, saying he feared it would worsen smuggling.

Among the country’s biggest gold producers are RioZim and Caledonia Mining.

FPR started refining gold in 1988, and at its peak producers from abroad sent in their gold for refining at its Msasa refinery.

However, FPR has not used most of its installed capacity to refine 50 tonnes of gold per year.

Mining experts said if the authorities would reduce punitive taxes (royalties), cost of importing cash and timeous payments the gold sector has the capacity to sustain the country’s economy.

The country is believed to be losing over US$1.7bn through gold leakages. Business Times

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