Gold deliveries receding as Government’s targets look a distant dream

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2045
  • Gold deliveries between Jan-Sep 2020 down 41% compared to prior year
  • Inefficient pricing models promoting side marketing
  • The country looks set to achieve less than 27.66 tonnes delivered in 2019
  • Govt is targeting 100 tonnes of gold per year by 2023

Harare – Gold deliveries to Fidelity Printers and Refinery (FPR) is down 41% year-on-year in September 2020 to 14.7 tonnes from 20.8 tonnes achieved over the same period last year with market watchers flagging a large chunk of side marketing due to inefficiencies at the exclusive State buying entity, FPR.

On its part, FPR has blamed the current year’s low deliveries to various local and global factors such as negative effects of the COVID-19 pandemic, electricity challenges affecting the country, deepening gold shafts and lack of mining equipment among small scale miners.

Gold deliveries from Artisanal and Small-scale Miners (ASM) between January and September 2020 has recorded an alarming decline comparative to the prior years. For the past 3 years, from 2017 to 2019, ASM delivered more gold to FPR than LSM.

The sector accounted for 63 percent (17 478,74kg) of total gold deliveries (27 650,26kg) to FPR in 2019. This was, however, a 17% shortfall from government’s target of 40 tonnes.

Meanwhile, 2018 registered record deliveries with FPR managing 33,2 tonnes.

During the period under review, small scale miners are currently lagging behind large scale producers contributed in part by the impact of the COVID-19 which resulted in closure of mining activities.

Of the total 14.7 tonnes delivered to FPR during the period under review, ASM contributed 6.80 tonnes, with large-scale miners contributing 7.8 tonnes.

Meanwhile, latest trade data shows that gold export value is down 4% to US$641 million during the 8 months period to August 2020 compared to US$671 million recorded in the same period last year. This shows that the country is failing to take advantage of the surge in global gold prices during the course of the current year, further highlighting the extend to which side marketing is hindering the country from realising full value from the gold produce.

Back in May 2020, FPR announced a US$45 flat fee per gram of gold for deliveries from ASGM while gold deliveries from LSM are now being paid 80% in US$ transferred to the relevant company’s nostro bank account and the remaining 20% being liquidated to local ZW$ at the prevailing official exchange rate.

It is interesting to note that on the day that FPR announced the new gold trading measures, the international market offered $54.8 per gram of gold. Based on that comparison, it means that FPR committed to pay 17.88% less than what is offered on the international market bearing in mind the price changes over time.

As it stands, the country looks likely to achieve less than the 27.66 tonnes delivered to Fidelity in FY2019, which was a 16% decline from 33.2 tonnes delivered in FY2018.

This trend places government’s gold sector and the wider mining sector targets in jeopardy.

Government is targeting 100 tonnes of gold per year by 2023, a figure which is expected to help the mining sector earn US$12 billion annually. However, for this target to be achieved, there is need to address the forex retention threshold and other related fundamentals to encourage miners to sale their produce through the formal channels.

Equity Axis News

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