Harare – In a cautionary statement to shareholders on the Zimbabwe Stock Exchange on Monday, Falcon Gold said the inability of gold producers to access foreign currency and the resultant failure of the Company to pay outstanding amounts to foreign creditors since June 2018, have resulted in key creditors cutting off critical operating supplies and a disruption in normal operations.
The miner said its No 2 mill at the Golden Quarry processing plant had a catastrophic engineering failure late last week, and management is undertaking a full impact assessment and is now evaluating various options to deal with the matter at hand.
Most mining equipment are sourced outside the country and require foreign currency which the central bank is failing to provide to local miners with several halting operations which has a broader negative impact on the overall gold production in the country.
However, Falcon Gold did not mention exactly what options will it take to resolve the matter, which has a negative impact on the Company’s production capacity.
“Notwithstanding this mill failure, to date the funding required to execute the 2019 financial budget has not been received by the Company and discussions with regards this funding are ongoing. As a consequence of the above issues, the Board is in communication with its various advisors on the impact of these matters on the Company’s results of operations and financial condition, which will result in a delay in the publication of the September 30, 2018 Abridged Financial Results to shareholders beyond 31st December 2018,” it said adding that shareholders should exercise caution when dealing with the Company’s shares.
Gold production in the country is on the dip mainly because of the monopoly of Fidelity Printers and Refineries, the only company which is licensed to buy gold from large and small-scale producers, and holders of gold-buying permits. It also does refining and exporting of gold in Zimbabwe.
However, that monopoly is now threatening the viability of large-scale miners in the country.
Moreover, the mining industry is overtaxed, with more than 22 taxes, charges and levies by various agencies like Environmental Management Agency, Minerals Marketing Corporation of Zimbabwe, rural district councils, among others.
The money which Government is paying is little such that miners are opting to sell on the black market especially the small-scale miners who for the first time in more than 10 years, emerged as the cornerstone of the sector after smashing production records, producing and delivering more gold than large-scale mining houses, statistics have showed.
The country’s primary producers yielded 24,8 tonnes of gold in 2017, according to official data. The sector has recovered from its three-tonne nadir recorded at the height of Zimbabwe’s economic crisis in 2008, but is still short of the 27.1-tonne peak reached in 1999.
RioZim is another miner which pointed out that it is failing to access sufficient foreign currency from RBZ to support its operations and had not received its foreign currency earnings since 2016 prompting it to take legal action demanding that the RBZ complies with its directives and policies, and also, for compensation for any losses that the Company has suffered as result of the Bank’s non-compliance with its directives from 2016 to date.
According to Government statute Gold miners are entitled to access 50 percent of their receipts in foreign exchange automatically in their nostro accounts and the balance 50 percent by application.
Companies and industries that depended on official allocations of hard currency are facing challenges to keep operating as the central bank is failing to allocate them enough foreign currency.
Most are forced to turn to the informal market for hard currency but this is not feasible and ethical, but if they do not do so they will run out of essential imports and shut down. Delta has closed its soft drinks plants for this reason.
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