Mining ZimbabweLatest Mining News, Policy and Industry Updates

Global gold holdings are said to have held firm at 1 083.8 t in the first quarter of the year, marking a rise of 1% on the same period last year, according to the World Gold Council’s (WGC’s) latest Gold Demand Trends report.

The global Covid-19 pandemic fueled the safe-haven investment demand for gold, with gold-backed exchange-traded funds (ETFs) attracting inflows of over 298 t to push global holdings in these products to a record high of 3 185 t.

In contrast, the consumer-focused sectors of the market weakened sharply during this period, with jewellery demand being hit the hardest by the effects of the outbreak, and subsequent lockdowns and physical distancing regulations. Here, the quarterly demand dropped by 39% year-on-year to a record low of 325.8 t.

The pandemic further cut demand, where the jewellery decline is led by a 65% drop in China – the largest jewellery consumer, and also the first market to succumb to the outbreak.

According to WGC market intelligence manager Krishan Gopaul, this is an “understandable” move as consumers have been confined to their homes for their own safety, and retailers having to close owing to various restrictions in efforts to curb the spread of the Covid-19 virus.

While “unsurprising”, he tells Mining Weekly in an embargoed interview that while it impacted on jewellery quite extensively, the sector was not the only one hard hit, as all areas “across the board” were impacted.

Although the decrease in demand is not confined to just that of the yellow metal, Gopaul believes a positive investor sentiment is still rife in the market, as while in contrast to demand numbers, “people were not able to operate normally as you would expect”.

In turn, he advises that the contraction in jewellery demand was “unavoidable” and that the gold market, and the rest of the world, are “facing very exceptional circumstances”.

However, the slump is not expected to last forever, as Gopaul states that the demand recovery rate will likely increase gradually over the course of the next few months.

Further, sharp investment inflows helped push the dollar gold price to an eight-year high, where demand, in value terms, reached $55-billion – the highest since the second quarter of 2013.

The gold price also reached a new record high in Indian rupees and the Turkish lira, besides others.

Central banks, meanwhile, continued to amass gold, although at a slower pace, considering the heightened volatility and uncertainty. Global gold reserves grew by 145 t in the first quarter.

Gopaul notes that this action “speaks to the way in which gold is viewed”, explaining that, despite central banks focusing on the economic impact of the virus and measures that are being taken to minimise and contain the impact thereof, “the need for robust, liquid and diversified reserves is still there, if not more so”.

In fact, he notes that with central banks remaining within the net purchase region, it “highlighted the fact that even in circumstances like these, central banks still feel that gold has a very important role to play in international reserves”.

The sentiment is similar to that of the last decade.

Russia has also announced that it would suspend its long-term buying programme, signalling a slowdown in global net buying for the second quarter and beyond.

Touching on supply, total first-quarter supply fell by 4% as the lockdowns imposed in response to curbing the Covid-19 virus disrupted mine production and gold recycling, as operations were halted at many projects in an attempt to curb the spread of the virus.

Meanwhile, with South Africa to head into a Level 4 lockdown from May 1, and mining companies expected to resume mining up to 50% capacity of their operations, Gopaul warns that, while the global gold supply market has “shown incredible resilience”, it may be too early to make predictions on what this could mean for the South African gold market, and international supply, during the rest of the year.

“However, it is reasonable to assume that South Africa’s production and supply will, overall, be lower year-on-year, but that’s because of the significant impact that Covid-19 has had.”

The council’s report indicates that bar demand weakened to 150.4 t in the first quarter, a year-on-year decline of 19%; while demand in the technology sector also fell, but by 8%, to a new low of 73.4 t.

Recycling, meanwhile, came to a near standstill towards the end of the quarter as consumers were more confined to their homes.

According to WGC market intelligence’s Louise Street, in a statement by the council published on April 30, the Covid-19 pandemic has “had a significant and unprecedented impact on global gold demand”.

She adds that gold demand will continue to feel the effects of the pandemic for the rest of this year.

“In particular, the divergence between investment in gold-backed ETFs and consumers via jewellery will likely continue until there is greater economic and market certainty,” she says.

However, to summarise what the industry has experienced in the first quarter of the year, Gopaul describes it as an example of the “self-balancing nature” of the gold market, where the yellow metal is “doing what it should be doing in the first quarter” – providing liquidity, and a safe haven, in the face of a tremendous amount of uncertainty.

“It’s key to always bear in mind that the safe-haven investment sentiment that we’ve seen in the quarter was particularly strong, despite the high levels of uncertainty,” he tells Mining Weekly, adding that the global financial stimulus from a monetary and fiscal level globally “has really helped fuel the sentiment of a safe haven demand, which is key to get an investor perspective on gold and shows that there’s still a huge level of positivity in the gold market”.

Minister of Mines and Mining Development Winston Chitando has refuted allegations of diamond looting in Chiadzwa and said there are only four authorised diamond miners in the country.

Business reporter

This was in response to online news that has been making headlines these past few days of how 12 diamond mining companies are clandestinely extracting diamonds worth billions of dollars in Chiadzwa.

An unnamed source told the Zim Morning Post that “The 12 mining companies have made easy the siphoning of billions of dollars in Chiadzwa diamond revenue into the pockets of some powerful individuals,”.

Speaking to the State broadcaster Chitando said, “In terms of of the provisions of the diamond policy, there are four companies who are allowed to undertake diamond mining in Zimbabwe. The first being Murowa Diamonds, second being ZCDC, the third being Anjin and the fourth being Alrosa. These are only four companies being allowed to undertake diamond mining in Zimbabwe”.

“Specific to the Marange Chiadzwa area there is the presence of only 3 companies. There is ZCDC which continues to mine, there is Anjin who have started limited mining and are also opening up other areas to increase their mining throughput. Thirdly there is Alrosa which is actually not in the Marange Chiadzwa area. They are undertaking exploration activities. They are outside the Marange/ Chiadzwa area and actually they are doing it throughout the whole country. They have up to seventeen sites throughout the whole country but which includes one or two areas in Marange area”.

Late former President of Zimbabwe Robert Mugabe once blamed corruption and looting for loss of revenue in Chiadzwa. He said the government had failed to account for diamonds worth more than US$15 billion “We have not received much from the diamond industry at all. I don’t think we have exceeded US$2 billion, yet we think more than US$15 billion has been earned,” Mugabe said.

At least 100 illegal gold miners in South Africa are hiding underground, too scared to surface with police on patrol to enforce the coronavirus lockdown, according to industry sources.

Many illegal miners, known as Zama-Zamas – a Zulu expression for “taking a chance” – were underground in abandoned or disused mines in Gauteng province when the lockdown began on March 27.

Lawyers, activists and illegal miners told the Thomson Reuters Foundation that Zama-zamas had little choice but to continue working, worried about being arrested if they surfaced and knowing there was no other work.

“They are struggling to get to the surface (to buy food) as police are blocking the entrances and they fear arrest,” said Johannesburg gold miner Zach, whose name was changed to protect his identity.

“At least 100 (zama-zamas) that I know of are trying to earn some money during the lockdown,” said Zach, 29, adding he had been arrested many times since turning to mining six years ago.

Illegal gold mining has plagued South Africa’s mining companies for decades, robbing the industry and state coffers of billions of rand through smalltime pilfering as well as networks run by organised crime.

The Minerals Council South Africa estimates seven tonnes of gold – from total national production of about 135 tonnes – is lost each year to illegal mining, which is driven by the joblessness and economic hardship that prevail across the country.

HUNGER OR ARREST

Thousands of zama-zamas are thought to be operating at any one time, many of them undocumented immigrants from neighbouring countries who provided migrant labour for South Africa’s mines in the past but were then laid off.

Zama-zamas are now a permanent fixture of the shanties that ring Johannesburg and its satellite towns along the gold reef, and are blamed for outbreaks of violence, including underground shoot-outs between rival gangs.

Once the largest gold producer, South Africa now ranks about eighth globally with mining accounting for roughly seven-percent of GDP.

The sector braced for a heavy hit when the government last month ordered most underground mines and furnaces to be put into care and maintenance due to the coronavirus.

But after a lobbying campaign by miners, it said it would allow mines to operate at up to half capacity during the lockdown, recognising the chance of instability if deep-level mines closed for a long period.

Informal mining has continued nevertheless as it remains largely unrecognised by the government – just like many zama-zamas, who are unable to seek financial assistance, legal experts said.

Edwin Makwati, a lawyer from the Legal Resources Centre in Johannesburg said that “artisanal miners depend on mining to feed their families but they are categorised as criminals”.

“Now they have to face the decision: do they die of hunger or risk arrest for violating the COVID-19 regulations?” he said in a phone interview.

Yvette, 32, a zama-zama from Soweto township whose name has also been changed, also believed there were still “at least 100 zama-zamas underground” in Gauteng province alone, sifting for gold in tunnels no longer maintained and at risk of collapse.

“There are (abandoned) shafts throughout the country where there could be more,” she said.

‘SCARY TIME’

A 2015 report by South Africa’s Human Rights Commission identified 221 open holes and disused shafts alone in Gauteng, which is the most populous of the country’s nine provinces.

Some had been covered by the government, but zama-zamas would likely find other entrances into the mines, some of which run up to four km (2.5 miles) deep, the report said.

Police spokesman Brigadier Vish Naidoo acknowledged it was likely that some zama-zamas were underground, adding that “they stay underground for months, even before lockdown”.

“A crime is a crime. There are no good zama-zamas,” he said in a phone interview.

A spokesperson for the Department of Mineral Resources and Energy said the ministry only kept records of mineworkers from legal operations.

“Illegal mining … is fueled by highly organized dangerous, well-financed and complex local and international crime syndicates,” he added in emailed comments.

Charmane Russell, spokeswoman for the Minerals Council South Africa, said that “illegal miners are not screened or protected in any way … and the gathering of people clearly does not comply with social distancing requirements.”

Ministry of Mines and Mining Development website is offline and has been for days.

At a time when the country is seeking investment downtime for days, even hours should be avoided at all costs especially from the country’s main administrator of mining affairs. Anyone who visits the website will be greeted by the message

This page isn’t working www.mines.gov.zw is currently unable to handle this request. HTTP ERROR 500.

The Penhalonga community in Mutasa South constituency continues to wallow in abject poverty as politicians have grabbed mine claims for self-enrichment, Centre for Research and Development (CRD) has said.

CRD director James Mupfumi said without proper devolution in place, only a few connected individuals will benefit from local natural resources at the expense of the majority poor.

He said Metallon Gold owned Redwing Mine which used to be a source of livelihood for thousands of locals has been invaded by political actors who have seized 30 percent shares.

“We have discovered that a son of a prominent politician in Zimbabwe has just got into Penhalonga with other political actors parcelling out each other 30 percent shares at Redwing Gold Mine.

“They have formalised illegal gold mining in Penhalonga. They have never been stopped regardless of this pandemic (Covid-19) and there is no revenue going to the communities and the plight of Redwing workers who are exposed to dust is worsening every day,” said Mupfumi.

He said the health of the local community was at risk as politicians continued to mine without proper registration and following procedure.

“We have three cases of pneumonomycosis which we recorded but the government has not looked into the case, but we see top government officials going to the mine to parcel out claims.

“They even started mining without proper papers. They have started digging without due diligence of the local communities,” he said.

The environmental activist said the community has no electricity and no source of income.

“Who is going to look at economic, social and environmental rights of communities,” said Mupfumi.

He said the government should immediately bring to parliament a Provincial and Metropolitan Bill to kick-start the devolution process.

“This devolution exercise being carried out by the government is useless. They are taking money to the provinces but there is no participation of communities in the projects under devolution,” he said._ New Zimbabwe

Financial services company INTL FCStone Europe, the Middle East, Africa and Asia market analysis head Rhona O’Connell says the majority of precious metals have moved into uncertain territory, with future trends difficult to predict as Coronavirus disrupts international buying and selling markets.

She further notes that although gold has performed well as a safe haven asset, with the onset of Coronavirus into territories besides its origin of China, came an unexpected drop in its value. “It initially dropped and a lot of people questioned why this happened as it seemed counter-intuitive [to how a safe haven asset should perform in times of financial turmoil].”

However, she notes that, with most market crashes, gold does initially crash, which is then followed by a rapid gain in value. She says there are two reasons why this happens, one being philosophical and the other technical.

The philosophical element takes into account the reason why many professional portfolio managers will hold gold in a portfolio. “It enhances value adjusted risk and risk/reward ratios, and therefore quite often you will find that when faced with distressed sales and potentially margin calls, that gold will be one of the key elements with which cash can be raised.”

She adds that gold then has a tendency to be sold off in an effort to mitigate stress, followed by, typically a later-stage, buyback by the same people that sold it. “This was the case at the beginning of the international Coronavirus outbreak when gold prices dropped.”

The technical side takes into account that the vast majority of equity markets settle in about three days after the date of the transaction, whereas gold settles within two days.

“Therefore, if you have exposure to the equities market, and you believe you are going to need cash to raise against margin calls, then you will have that money in your assets 24 hours before you actually need it because gold settles that much more quickly.”

Meanwhile, post-Coronavirus, gold will continue to remain highly valued, potentially even reaching $1 800/oz, says corporate investment banking company Natixis senior commodities analyst Bernard Dahdah.

He reiterates O’Connell’s sentiment that while a short-lived crash in gold is to be expected once markets become volatile, this should typically be followed by a substantial rise in its value.

It is important to note, however, that there will be a residual impact of Coronavirus in two places, one in employment figures and the other in debt overhang on corporates, he points out.

Employment will play a big role in future gold value. He explains that 22-million people have applied for initial job assistance, which is equivalent to 13% to 15% unemployment, “with a likelihood of reaching 20%.”

Dahdah states that job losses happened very quickly as Coronavirus spread uncontrollably and that most likely, the re-employment of people will take longer through the recovery phase of the economy. “The problem that arises with this is some mortgage and car repayment defaults, and that could potentially create some headache to some of the mortgage providers and the economy.”

Unemployment, coupled with debt overhang on corporates, will see debt levels increasing and the downgrading of major companies, he says. “This will create a higher cost of funding, lower investments, lower growth and lower employment.”

“This combination of concerns from defaults from high yields with low oil prices I think is going to keep gold prices up,” states Dahdah.

In addition, he suggests that with the US Federal Reserve System having lowered interest rates, which are not going to increase “anytime soon, and which are close to zero”, coupled with low inflation and subdued oil prices will lead to gold prices reaching $1 800/oz before the end of this year.

Further, Dahdah says that while silver has been underperforming for a while, it is important to remember that 60% of world silver production goes into industrial demand. “With some operations restarting, the value of silver should improve,” he notes.

However, platinum-group metals may suffer as the automotive industry has been hit hard with factories closed or having lowered production volumes, states Dahdah, adding that aluminium is also largely exposed to the automotive sector, so “will probably be hit hard too”.

Both O’Connell and Dahdah presented as part of the Outlook for Precious Metals in a Coronavirus World webinar, presented by the London Bullion Market Association on April 23.

Mining Weekly

The government of Lesotho has given the green light for diamond mines to reopen from Monday, ahead of the May 5 lockdown extension, Gem Diamonds said on Friday.

Mining Weekly can report that Lesotho is authorising diamond mining’s recommencement in the Mountain Kingdom, contingent on compliance with Covid-19 health and safety guidelines.

The small country surrounded by South Africa produces some of the world’s largest diamonds from a relatively small volume of kimberlite ore and hosts mines including Gem Diamonds’ Letšeng, Firestone’s Liqhobong, Namakwa Diamonds’ Kao and Lucapa’s Mothae.

London-listed Gem Diamonds stated in a news release that, in accordance with a phased ramp-up plan that was compliant with health and safety protocols formulated by health experts for the prevention of Covid-19 disease, its Letšeng mine would reopen on April 27.

Practical supply chain and market considerations arising from the continued lockdown in Lesotho, South Africa, Belgium and other relevant jurisdictions would also be reflected in this plan.

To date, there had been no reported instances of Covid-19 positive test cases in Lesotho, at the Letšeng mine or any of its international operations.

A comprehensive Covid-19 management plan, which prioritised employee, contractor and customer safety, had been adopted and all relevant Covid-19 safety protocols would continue to be observed.

The company, headed by CEO Clifford Elphick, said it intended to continue to conduct flexible tender sale processes. After the scheduled March tender viewings of Letšeng large diamonds were cancelled owing to the travel restrictions imposed by particularly Belgium, India and Israel, a flexible tender sale process generated revenue of $18.8-million. This was in addition to the $7.8-million Letšeng small diamond quarterly tender that closed on March 18. Guidance for 2020 would be provided once further flexible tender sale processes had been completed.

Confidence has been expressed that the Letšeng operation will be able to ramp up to full production rapidly.

Gem had $16.7-million in attributable cash as at March 31, with unutilised financial facilities amounted to $43.2-million and additional facilities of $33.6-million available to the group.

Mining Weekly