, pub-3787448768440954, DIRECT, f08c47fec0942fa0 [google-translator]

Export incentives lure miners to Zim’s new bourse; VFEX

By Eben Mabunda – Tuesday 11 January 2022

HARARE (Mining Index) – ZIMBABWE’s new bourse, the Victoria Falls Stock Exchange (VFEX) despite a slow take-off following  its launch in late 2020, has in recent months sparked the interest of Zimbabwean invested mining firms, with 2 mining firms having listed this December.

Bindura Nickel Corporation (BNC); Zimbabwe’s largest nickel producer became the latest addition to the market mid-December after the country’s largest Gold producer Caledonia Mining debuted on the VFEX on December 2nd, bringing the tally of counters to four.

Attracting mining firms to the VFEX, is a regime of export incentives introduced by the Zimbabwean government last May when it dangled 80% forex retentions on incremental exports for exporters who exceed their monthly average exports. The deal was sweetened for all VFEX listed firms which can now retain 100 percent of their incremental export earnings.

In a recent circular to shareholders, BNC chairman, Muchadeyi Masunda notified shareholders on the motivation to switch to the new bourse from the Zimbabwe Stock Exchange (ZSE):

“BNC generates income in foreign currency, and in terms of prevailing exchange control regulations, the company compulsorily surrenders 40 % of its earnings for Zim dollars converted at the auction rate. Companies that are listed on the VFEX are allowed to retain 100% of their incremental export proceeds in foreign currency, which reduces exposure to the compulsory surrender requirements,” said Masunda.

Inflationary pressures in Zimbabwe’s frail economy have seen a surge in operational costs for miners, as the annual inflation closed the year at 60.74%, registering a fourth consecutive rise in the aggregate. The November and December month on month inflation came in at 5.76%, versus a 6.4% October outturn. Of note, inflation peaked in July of 2020 at 830%, before climbing down in successive months up to July 2021.

Also weighing on the overall economy is a weakening local currency which shed over 35% of its value on the formal market and 85% on the informal in 2021. The parallel market rate, is trading at premiums of over 90% to the formal market rate.

The complexity for miners then is; production costs are priced at parallel market rates by suppliers whereas 40% of their earnings are surrendered in Zimbabwean dollars at the formal market rates through the central bank, creating an ever-widening disparity between the costs of production and the revenue generated.

A VFEX listing helps bridge the gap and guarantees a 100% retention on all forex receipts-for incremental export earnings.

The Caledonia stock debuted at a price of US$12.64 per depositary receipt on the VFEX, raising approximately US$7.83 million in capital for the AIM and New York Stock Exchange gold miner. The listing came nearly 18 months after Caledonia delisted from the Toronto Stock Exchange (TSX) on the back of high administrative costs.

The VFEX has granted concessions to new entrants including a waiver of listing fees in the first year.

Established as a means of luring foreign capital to the resort town of Victoria Falls, the VFEX was commissioned by Zimbabwean President ED Mnangagwa in December 2021, 13 months after its opening.

Caledonia closed trade at…on the VFEX while BNCs stock closed the day at a price of on Monday January 3rd, the first day of trade in 2022. Caledonia whose primary asset is Blanket Mine in South Western Zimbabwe set a new quarterly gold production record of 25% to 18 965 ounces in Q3’2021. ENDS//

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