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Prospects for Zimbabwe’s gold

In 2019, the Treasury Department admitted that only 33% of gold produced in the country is delivered to the central bank amid reports Zim lost US$1.5 billion worth of gold to corruption in 2020.

By Eben Mabunda

HARARE (Mining Index) – A STEADY growth trajectory on Tuesday the 31st of August as it clocked at $1816.7 per troy ounce on global markets, an increase of 0.18% from Monday’s closing price. This price level is 4.24% higher than average Gold Prices observed in the past 30 days ($1739.7) -as gold continues to firm.

Spot gold rose 0.9% to $1,825.99 an ounce by 1:35 p.m. in London on Friday the 3rd of September against the prior session’s closing price after U.S. Jobs Data came in well below estimates.

In the most recent update, Goldman Sachs analysts project that gold prices could hit the $2000 mark by the end of this year. Gold prices went as high as $2000/ounce in 2020, but it remains uncertain whether the gold markets will remain as bullish.

Nevertheless, uncertainties around the timing of the taper by the Fed will likely propel gold prices higher- at least in the short term.

Zimbabwean set-up

While historical trends show no correlation between gold prices and Zim’s gold output (Sanderson et al, 2021), this presents Zimbabwe, Africa’s eighth largest gold producer with a golden chance (pun intended), to leverage on the strengthening prices of commodities, generate more foreign currency, revamp its mining regulatory framework and position itself for the foreseeable future gains.

The major source of gold submissions to the country’s sole gold buyer – Fidelity Printers are the artisanal miners whose contribution has fared between 50%-65% over the past five years.

The stats are indicative of the poor investment in Zimbabwe’s mining fraternity as well as a litmus reflector to the reality that with more capital injections, more large-scale miners could be capacitated to glean more from the sector and transform the ‘improper fraction’- while generating more forex earnings for the nation.

Blanket Mine is Zimbabwe’s largest single gold mine by output having produced 57 899 ounces in 2020, a jump from 55 000 ounces recorded in 2019.

The mine’s 2021 production is expected to be between 61 000 to 67 000 ounces while production guidance from 2022 onward is set at 80 000 ounces.  Other primary producers of note include Kuvimba, RioZim, and Falgold.

A bird’s eye’s view of Zimbabwe’s economic and mining policies exhibits a flip-flop trajectory that has been marred by haphazard decisions, a trend that has earned Zimbabwe the reputation of the worst mining jurisdiction in Africa- according to the findings of Fraser Institute’s “2020 Annual Survey of Mining Companies.”

The results of this survey sound an alarm to the dire need for the employment of unswerving economic policies that foster investment.

This, among others, has affected the inflow of investment into Zim and penultimately its gold mining sector. Between 2017 and 2019,

Zim’s FDI Inflows at an aggregate US$1.27 billion lagged behind regional counterparts Zambia, Mozambique, and South Africa which generated US$2.06 billion, US$7.2 billion and US$12.1 billion respectively.

Zimbabwe’s gold output plummeted 31% in 2020 to 19,05 tonnes from 27,66 tonnes in 2019 having hit a record high of 33,2 tonnes in 2018 with the yellow metal generating US$1,3 billion and US$946 million in foreign receipts for 2018 and 2019 respectively.

This presents a gulf between the current output and the government’s envisaged US$4 billion target for 2023.

This ‘Jewel of Africa’ boasts of two major geological features; the wealthy Greenstone Belts (also known as Gold Belts) and the Great Dyke which are home to billions worth of gold reserves and many other metals.

However, much explorative work needs to be carried out.

Arguably, given the nation’s vast mineral resource base, a 100 tonne gold output for Zimbabwe annually is not far-fetched. However, the cheese deserves some moving in the local regulatory framework to achieve such feats.

Local Challenges

Meanwhile, Zimbabwe’s central bank plans to sell a majority stake in Fidelity Printers — in a bid to boost compliance with trading of the precious metal could be a boost for the sector.

However, reports by the Zimbabwe Independent of the Tagwireyi (sanctioned) linked Kuvimba Mining could dampen hopes of the transparency of such an exercise.

Hampering a turn-around to Zimbabwe’s gold output, is rampant side marketing due to price distortions and payment challenges which have given rise to arbitrage, corruption and illicit financial flows within the sector.

In 2019, the Treasury Department admitted that only 33% of gold produced in the country is delivered to the central bank amid reports Zim lost US$1.5 billion worth of gold to corruption in 2020.

Antidote

As such, the government must cease impunity on illicit financial flows, formalize Artisanal and Small-Scale Miners follow through the partial privatization of Fidelity Printers transparently and encourage investment into the gold sector through the setting up investor-friendly regulatory frameworks.

This article was written in collaboration with Rugare Mukanganga. ENDS// www.miningindex.co.zw

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