- March 11, 2021
- Posted in LOCAL
Fidelity Printers and Refiners (FPR) is paying artisanal and small scale miners on the spot gold at prevailing world prices but deducting royalties and costs of importing cash into the country which is forcing players to look for alternative markers.
Yesterday’s gold spot price was at US$55,016 per kilogramme and FPR’s prices after deductions was under US$50,000, a situation which pushes small scale miners to search for an alternative market, according to industry experts.
In the past three years, small scale miners contributed 60 tonnes of gold against large scale producers who delivered 42 tonnes during the same period.
FPR general manager Fradreck Kunaka told Business Times that the sole buyer of gold has moved to plug some of its shortcomings to encourage miners to sell the bullion through formal channels.
“On small scale miners we are paying 100% United States dollars at the prevailing gold world market price but the price differs a bit with the international price in that we deduct royalties and the cost of bringing in United States dollars into the country and this may be the reason for other miners to opt for other markets,” Kunaka said.
He said the small-scale miners are paid as they step in with their gold into FPR while the large- scale miners are paid within seven days of delivery.
FPR through the Reserve Bank of Zimbabwe imported enough cash and payment periods have improved, he said.
While Kunaka did not come up with a solution, he said forex retention levels should be looked into.
“We have a challenge on the 60%-40% forex retention of large scale miners where they are getting 60% forex and 40% local currency on the prevailing rate of the day because there is a big disparity between the parallel market rate and the auction system rate.
Large scale miners argue that they are charged at the parallel market rate when they want to procure raw materials in local currency,” he said.
The country’s gold output plummeted 31% to record 19.052 tonnes during 2020 from 27.66 tonnes recorded during 2019 due to Covid-19 effects, delay in payments and low foreign currency retention levels.
Gold deliveries for the month of January 2021 were 0.99 tonnes from 2.54 tonnes during the comparable period last year.
Large scale producers delivered 0.64 tonnes while small scale miners delivered 0.35 tonnes to FPR.
Gold export receipts in January 2021 were at US$53.1m from US$98.1m during the same month last year due to subdued deliveries caused by the effects of Covid-19, heavy rains and the failure to remove costs on small scale gold miners.
Gold Miners Association of Zimbabwe CEO Irvine Chinyenze said: “The failure by the sole buyer to match the world prices only imply that the gold miner will sell his or her bullion to an alternative market where prices are high. Till they look into the matter seriously the problem will continue.”
Gold’s export receipts fell 16% to record US$891.5m in 2020 from US$1.064.5bn in 2019 due to Covid-19 implications, side marketing, smuggling and delays in payments.
In his 2021 Monetary Policy Statement, Mangudya said side marketing was one of the reasons for the decline in gold deliveries last year.
The Covid-19 pandemic restricted the purchasing of raw materials in China and Russia and the bringing in of United States dollar notes to pay miners.
In a recent mining report, experts advised that President Emmerson Mnangagwa’s government should give artisanal mining cooperatives legal standing, pay gold producers at prevailing world prices and strengthen mining dispute resolution mechanisms.
The report blamed FPR’s flawed centralised gold buying scheme and called for the law to bring complicit powerful politicians to book as they are believed to be sponsors of machete gangs’ violence in Midlands and Mazowe.
The report said the development of the gold sector is crucial if Mnangagwa’s government is to salvage prospects for Zimbabwe’s economic recovery from decades of economic stagnation.
Zimbabwe is targeting 100 tonnes of gold per year by 2023, however, with a number of challenges in the gold sector, the figure is likely not going to be reached.
Recently, Mangudya said the central bank will capacitate miners and incentivise them to ramp up production.
The constraints facing the sector has seen gold losing its top spot as the highest foreign currency earner to platinum in the past two years.