- Mines not making enough money due to undercapitalisation
- 55% forex retention more than enough
Harare – Caledonia Mining Corporation plc CFO, Mark Learmonth stated undercapitalisation as one of the factors affecting the mining industry in Zimbabwe at a time when there are forex shortages.
In an interview with The Assay TV in South Africa, Learmonth said his Company, Caledonia finds the 55% forex retention it receives from government more than adequate to cover for its material costs and profit repatriation, a privilege that some mining companies are failing to enjoy due to undercapitalisation.
“…so many Zimbabwean mines have been so undercapitalised for so many years such that they do not make enough money”, Learmonth said.
Caledonia sells its gold to government and receives 55% of the price in foreign currency and 45% in local currency as per the forex retention threshold set by the RBZ.
The Company uses local currency to pay taxes, wages and other local expenses while the foreign currency is used for foreign expenses such as to import needed materials and profit repatriation.
The operating environment in Zimbabwe has been characterised by shortages and high cost of accessing foreign currency, electricity shortages and hyperinflation, factors which have affected most businesses operations, without sparing the mining industry.
These factors have seen mining companies such as Falcon Gold (Falgold) delisting from the Zimbabwe Stock Exchange (ZSE) due the distressed operating and financial conditions of the company among other factors.
The year 2018 also saw government trying to sell six of its loss making mines that include Jena Gold Mine, Elvington Gold Mine, Gwayi, Mbungu, Lynx and Sandawana Emerald Mine before cancelling the bids.
Of government’s 23 mines, only three are running despite the country looking towards a US12 billion mining industry by 2023.
Government has also lost some gold due to smuggling to neighbouring countries as local miners view the existing mining policies and forex retention as unfair.
Caledonia Mining Corporation plc is a mining, exploration and development company with a 64% shareholding in Blanket Gold Mine located in Gwanda.
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