Four reasons why ASM decline in gold delivery.
Artisanal and Small Scale Miners (ASM) for the better part of the year have been the biggest producers of gold until this November when their delivery to Fidelity Printers and Refiners (FPR) declined by almost 44 percent compared to the previous month.
By Dickson Rudairo Mapuranga
This sharp decrease has resulted in ASM falling behind large Scale miners for the second time in a calendar year after doing so in July. Zimbabwe Miners Federation (ZMF) said that there are two chief explanations behind this severe reduction in gold deliveries to FPR, that is, fuel shortages and decline in the value of RTGS and Bond note against the USD.
In every failing economy, many sectors are affected negatively resulting in a decline in production and development, due to the prevailing economic situation in Zimbabwe, Mining Zimbabwe has identified four reasons which led to the decline in gold delivery by ASM to FPR.
Alternative market
The Parliamentary Portfolio on Mines and Mining development last month urged the government to remove FPR’s monopoly as the sole gold buyer to promote competition, the monopoly was accused of creating an illegal market due to unfair prices offered by FPR to the miners. With the prevalent cash shortages and the decline of RTGS against the United States Dollar, many ASM might have been tempted to seek souk in the parallel market. Thus, the enormous amount of gold FPR used to obtain from ASM might have found its way to the black market which offers good money than FPF.
Fuel shortages
The shortage of fuel played a major role in the decline of production, according to one artisanal miner, serious shortages of fuel from October have affected ASM gold miners who are more depended on diesel than large scale gold miners. Many ASM operates in remote areas where electricity is scarcely established. Since most of their apparatuses depend on diesel and petrol, the fuel crisis has led some ASM suspending operations.
Cash Crisis and inflation
The swift collapse of RTGS and the Bond money against the USD on the parallel market led to a fly rocketing of prices both on the informal and the formal sector, according to one expert in the mining industry, the government failed to recognize that when producing small quantities the thirty percent RTGS given to ASM is very impactful on the margins and profitability of small operations versus large small scale operations that have access to further government funding. Thus small scale miners either kept their gold or stopped delivering it to FPR for other markets.
Closure of gold mills
One expert in mining said that the government inspection operations resulted in the closure of several stamp mills which were located strategically close to ASM, the closure of these mills has created a burden on ASM who is now forced to transport core to a distant mills for processing, fuel crisis is further worsening the already prevailing situation, therefore productivity is affected in the in several areas due to closure of gold mills.