Production costs going up in ZWL
The large-scale mining sector has been hard hit stubbornly by the cost of production, labour and materials due to the current foreign currency retention offered by the government which is not viable, Mining Zimbabwe can report.
Anerudo Mapuranga
The large-scale producers have lamented about the current foreign currency retention which is at 60% as the elephant in the room that is negatively impacting production significantly.
According to Freda Rebecca Managing Director Mr Eliakem Hove, primary producers were pushing for the government to give the miners 100% forex payment.
He said that the 40% Zimbabwean dollar component is aiding the increasing cost of production.
“Our position as the Chamber as well as Freda Rebecca 60/40 is not adequate we would actually want 100%, worst case 80/20. The Zim dollar component increases your cost currently sitting around 60% when trading, 60/40 is putting pressure on our side,” Hove said.
In a trading update, Bindura Nickel Corporation secretary Conrad Mukanganga said the adverse impact of the cost of local inputs and the increasing disparity between the auction foreign exchange rate, at which the company surrenders 40% of its revenue for Zimbabwe dollars, and the prevailing parallel market rate battered the miner.
He said the unit cost of production increased significantly due to the higher costs incurred in the quarter, as a result of the adverse impact on the cost of local inputs of the increasing disparity between the auction foreign exchange rate, at which the Company surrenders 40% of its revenue for Zimbabwe dollars, and the prevailing parallel market rate.
According to the Deputy Chairperson of the Geological Society of Zimbabwe Mr Kennedy Mtetwa operational costs in local currency are increasing due to high inflation on the parallel market and the failure by the central bank to provide all suppliers with the required foreign currency.
“Production costs going up in ZWL yet exchange rate for 40% is staying the same,” said Mtetwa
Recently, diversified mining group RioZim during the first quarter of 2021 said it did not benefit from a 12% increase in average gold prices due to the reduction of gold foreign currency retention threshold from 70 to 60% by the central bank.
The miner said the retention threshold impacted negatively on gold production by 10%.
Zimbabwean large scale miners are paid 60% of their gold submissions to Fidelity Printers and Refiners (FPR) in USD and 40% in the local currency which of late is on a downward trend on the parallel market. Equipment suppliers and local service providers peg their prices at the prevailing parallel market rates which currently is at ZWL180 against 1USD. The official Foreign Exchange Auction Trading System rate is currently pegged at ZWL86.0551 against 1USD as of 31/08/2021 a rate criticized for being unrealistic as foreign currency allocation isn’t available to everyone.