February Gold deliveries up 20 percent, but fall short of the combined y/y two months period


    Harare – Gold deliveries to Fidelity Printers and Refiners increased by 20 percent month on month to 2.1 tonnes in February 2019 from 1.8 tonnes delivered in January, but registered a 15 percent slump in the two months between January and February against the comparable period last year.

    A total of 3.9 tonnes was delivered in January and February this year coming up against 4.6 tonnes delivered in the same period last year.

    Although year on year gold deliveries in February this year marginally increased from 2.0 delivered in the same period last year, the January deliveries which stood at 1.8 tonnes proved the decisive blow, comparative to 2.6 tonnes delivered in January last year.

    Government has pinned hopes of economic recovery process on the country’s biggest foreign currency earner, setting up a gold delivery target of 40 tonnes this year after 33.2 tonnes last year. Government is hoping to ensure an ambitious annual gold delivery target of 100 tonnes by 2023 in line with 2030 vision to transform Zimbabwe into a middle income economy.

    However, the sector is not exempt from the existing economic challenges like foreign currency shortages, inflation and price distortions in the market which are crippling production across different sectors.

    Analysts have argued that it will be difficult to achieve the set targets given the fact that miners are most likely compelled to sell the yellow metal through unofficial channels which provide them with attractive returns than the one offered by government.

    Post Monetary Policy presentation by central bank governor, Dr john Mangudya on 20 February 2019, small scale gold producers requested the central bank to process the local currency component of payments for gold to be made at a 1:3.5 RTGS dollars for which the bank is not prepared to offer. This followed the introduction of a interbank foreign currency market with a starting rate of 1:2.5.

    However, Mangudya said that the Bank not heed to the miners call but “will consider providing an incentive so that they can increase gold production.” The Bank is currently offering a 70 percent export retention threshold, revised upwards from 55 percent which Mangudya presented in the monetary policy statement.

    During a meeting with small scale miners last month, Mines Deputy Minister Polite Kambamura made a chilling admission that gold being sold through official channels maybe just a third of what the country is producing.

    “What is a being channelled to Fidelity is only a third. I believe we are already producing 100 tonnes of gold as a country, but I am convinced that we are losing out to smuggling and under-declaration,” Kambamura said.

    At the meeting, small scale gold producers angrily protested against the new RBZ measures, saying lower retention thresholds would only worsen smuggling.

    With foreign currency shortages still persisting and miners yet to reach consensus with the government, possibilities of a major slump in gold deliveries seem very likely.

    -Equity Axis News


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