• Record Gold Deliveries: Zimbabwe achieved 3,766 kg, over double the 1,489 kg from November 2022, contributing to a year-to-date total of 32 tonnes
• Projected Annual Earnings: Total gold revenues for 2024 could range between $2.37 billion and $2.40 billion, marking a new record for the country
• The government should streamline regulations, lower taxes, and combat corruption, to transform gold sector into a $5 billion industry

Harare- The gold sector has achieved remarkable advancements in gold sales, having already surpassed last year's figures. November’s gold deliveries experienced a significant uptick, reaching 3,766 kg more than double the 1,489 kg recorded in November 2022, when the country achieved a record output of 35.3 tonnes. This has put total gold output to Fidelity year-to-date to 32 tonnes exceeding the 30.1 tonnes recorded for the entirety of 2023. With an ambitious target of 35 tonnes for the current fiscal year, the industry is positioned to reach the target.

This figure is slightly below October's deliveries of 4,167 kg, reflecting the rainfall dynamics which affects mining operations. Historically, gold production tends to decline in December due to inclement   weather, particularly heavy rains that can flood mining pits and exacerbate electricity supply issues. This downward trend typically begins in November, as increasing rainfall impacts output, evident in the decline from October to November.

However, November saw lower-than-expected rainfall, allowing production to stabilize at 3.8 tonnes, setting a new monthly output record. With favourable dry weather conditions, achieving the remaining 3 tonnes in December is feasible, and the total may even slightly exceed this target.

This positive trend also positions the industry for another record in annual earnings. In October, gold exports reached a historical high of US$296.85 million, driven by the production of 4,167 kg and average gold prices ranging from US$1,600 to US$1,650 per ounce.

November did not witness significant declines in gold prices, and based on October's performance, we anticipate November earnings to fall between US$250 million and US$270 million, with a projected figure of approximately US$268.1 million based on the average price per kilogram.

Year-to-date gold revenues from January to October have reached US$1.87 billion, already exceeding the total gold revenue for the entire year of 2023, which was US$1.80 billion. By factoring in the projected earnings for November, the estimated 11-month total falls between approximately $2.12 billion and $2.14 billion, depending on actual performance in November.

In the past three years, November and December revenues have varied significantly, with figures of US$248 million and US$188 million for 2021, US$184 million and US$123 million for 2022, and US$116.3 million and US$158.3 million for the respective months. Over these three years, November averaged US$182.77 million, while December averaged US$156.43 million, leading to an overall average of US$169.6 million for both months.

However, to calculate the projected earnings for November, we need to consider the average gold price and the total weight of gold produced. The average gold price is $2,364 per ounce, while the total weight of gold produced is 3,766 kg. Taking into account the conversion factor of 32.15 ounces per kilogram, this calculation yields a projected earnings figure of approximately $268.1 million for November.

The same goes for December. To calculate the projected earnings for December, we need to consider the average gold price and the total weight of gold produced. The average gold price is $2,364, and the projected gold production for December is between 3 tons and 3.5 tons. Therefore, the projected value for December is between approximately $227.9 million and $265.9 million.

Therefore, based on this, we project total earnings for the full year to fall between approximately a lower of US$2.3 billion and US$2.4 billion. This will be a record for Zimbabwe, the first step maybe towards another record production.

Assuming stable mining operations and a consistent electricity supply in December, we forecast earnings of between $228 million and $266 million, which would elevate the total annual earnings to a range of $2.37 billion to $2.40 billion.

These projections hinge on stable global gold prices, which are expected to remain resilient courtesy of increasing geopolitical tensions in the Middle East.

Historically, the highest revenue recorded was US$1.98 billion in 2022, followed by US$1.8 billion last year.

According to the World Gold Council, the average gold price in 2024 up to October was $2,364. Based on this price, Zimbabwe's year-to-date gold export earnings could have been approximately $2.3 billion. However, the actual earnings were $1.87 billion, indicating a potential loss of $400 million.

Several factors may have contributed to this discrepancy. One major issue is the restriction on selling gold directly to the London Bullion Market. Instead, Zimbabwe is forced to rely on agencies to facilitate these transactions, resulting in reduced earnings and increased costs.

400 million means Zimbabwe is losing 20% on every tonnage exported. This significant loss highlights the need for Zimbabwe to reassess its export strategy and explore alternative options.

This is the same with last year. In FY23, Zimbabwe earned $1.8 billion, compared to a potential $2 billion based on spot prices. This implies a loss of $200 million.

Zimbabwe possesses the potential to escalate gold production into a $5 billion industry, provided the house is in order. However, a primary challenge facing the sector is electricity deficits, which compel firms to rely on costly backup power solutions, ultimately inflating operational costs and impeding productivity. To mitigate these issues, a consistent electricity supply for gold miners is essential to reduce costs.

Government should consider lowering taxes and streamlining regulations for the sector, including exempting gold mining firms from surrender requirements of 25% or just even lower them down to 5%. Miners should retain more capital to invest.

The government must also intensify efforts to combat gold leakages, which are costing the country billions in lost income. Despite ongoing initiatives, many individuals involved in these leakages are reportedly politically connected, as highlighted in the "Gold Mafia" documentary. To revitalize Zimbabwe's gold mining sector, it is crucial to tackle corruption without any exceptions.

Government should also foster competitive pricing strategies, to discourage smuggling, particularly among smaller miners seeking better opportunities. Gold remains Zimbabwe’s most significant export commodity, accounting for approximately one-third of all exports and generating 60% of the country’s foreign currency receipts and around 30% of export value. The nation experienced a drastic decline in gold production in 2008, recording only 3 tonnes, but rebounded to a record output of 35 tonnes in 2022.

Key players in the large-scale gold production space include Kuvimba Mining, Padenga, and Freda Rebecca. Incentivizing both large-scale and small-scale miners is vital for enhancing overall output. Currently, Padenga leads the gold production landscape through its mining arm Dallaglio, which operates the Eureka Mine and the newly operational Pearless Picksone mine.

Caledonia, another significant contributor, operates the Blanket Mine with a capacity of 78,000 ounces, while Bilboes is undergoing maintenance. Once Bilboes resumes operations, it is expected to elevate Caledonia’s output beyond 3 tonnes, solidifying its status as a leading gold asset. Kuvimba Mining House also oversees several key gold mines, including Freda Rebecca, which totals 75,000 ounces, alongside improvements at Shamva Mine.

Large-scale miners account for 30% of total gold exports and earnings, while small-scale miners contribute the remaining 70%.

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