Gold Industry generates 45 percent of mineral exports

Harare – The gold sector remains one of the key minerals in Zimbabwe in 2018, generating 45 percent of mineral exports, compared to 40 percent in 2017, according to a report by the Chamber of Mines dubbed State of the Mining Industry 2018 Report, Prospects for 2019.

The gold industry employed around 30 percent of total formal mining employment, compared to 25 percent in 2017, and in excess of 500,000 are engaged in artisanal and small-scale gold mining.

According to the report the structure of the Zimbabwe gold industry remained predominantly unchanged in 2018, compared to 2017.

The gold sector comprises of large-scale primary producers, small-scale and artisanal miners as well as gold that is produced in PGMs production.

“Gold output is expected to increase to 34 tons in 2018, from 26.4 tons in 2017. As for 2019, the majority of gold producers indicated that their output targets can only be achievable if there is adequate foreign exchange allocations, low cost of inputs (low domestic inflation), adequate sustenance and ramp up capital.

“If the above are guaranteed, 60 percent of gold producers indicated that they would increase production by between 10 percent and 20 percent, while 20 percent would increase output by between 1 percent and 10 percent and the remaining 10 percent will increase by more than 20 percent,” read the report.

The Chamber of Mines pointed that survey findings revealed that weighted average capacity utilization in the gold industry is estimated at 71 percent in 2018, falling from 74 percent in 2017.

“The majority of gold producers indicated that capacity utilisation fell because of inadequate foreign exchange allocations and input shortages, high cost structure, power outages and antiquated equipment.”

According to the report, the majority of gold producers identified several bottlenecks as constraining their operations including inadequate foreign exchange allocate

“Most gold producers reported that on average they received between 12 percent and 18 percent of their foreign exchange proceeds during 2018. The remainder is liquidated in the RTGS account at 1:1. This is happening at a time 80 percent of their suppliers are no longer accepting RTGS for sett ling invoices.

“Respondents indicated that in isolated instances where RTGS are still accepted the local input prices have moved upwards as much as six times, impacting negatively on the viability of mineral producers.”

Additionally, the majority of gold producers have not expanded their operations over the past two years due to capital and foreign exchange shortages.

Going forward the Chamber of Mines said respondents in the gold industry recommended that the Reserve Bank of Zimbabwe need not only to provide adequate and timely foreign exchange allocations, but also provide adequate foreign payments to support importation of critical raw materials for production and capital equipment for expanding operations.

Respondents also recommended the Government to allow gold producers to access a minimum of 70 percent of their proceeds into their nostro in line with the actual US$ cost of inputs on the market,

Another recommendation is that for the remainder liquidated at 1:1 in the RTGS, a fair compensation aligned to foreign exchange developments on the market should be applied.

Moreover, they recommended for the convergence of incentives and support for both small-scale and large-scale producers.

All the respondents recommended that capitalisation support and incentives (reduced royalty and access to proceeds in foreign exchange) applicable to small scale producers should also be extended to large scale producers and the respondents cited the fact that both producers face the same market and price, while large scale producers have a relatively higher production cost compared to small scale producers.

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