Zimbabwe gold mines face collapse on weak bullion price: mining group - CNBC Africa

Zimbabwe gold mines face collapse on weak bullion price: mining group


by Reuters 0

Zimbabwe's gold mining firms are making losses due to weak bullion prices and could collapse unless royalties are reduced for producers.

This was announced by the country’s Chamber of Mines.

Gold is the single largest export earner in the southern African country, whose economy is flat lining as a result of lack of investment, electricity shortages and high cost of capital.

Spot gold rose 1 per cent to its highest since early September to 1,292.20 US dollars an ounce on Tuesday, having plunged to 4-1/2 year lows late last year.

In November, Finance Minister Patrick Chinamasa reduced royalty fees on gold to 5 per cent from 7 per cent in the 2015 budget but the mining body, which represents all major mines, said it wanted a further reduction to 3 per cent.

In a report issued in December the mining chamber said that mines were making losses of up to 100 US dollars an ounce due to weak gold prices and high electricity charges.

Mines are charged higher electricity tariffs to ensure continuous supplies but this is not always the case in a country that produces 1,200 MW against a peak demand of 2,200 MW.

(READ MORE: Metallon expects to lift Zimbabwe gold output to 150,000 oz this year)

In the report by the mining chamber seen by Reuters on Tuesday, the group said lower power tariffs and uninterrupted supplies would save gold mines up to 55 US dollars an ounce.

"The above measures would have ensured the gold mining companies operate on a cash break-even basis and avert gold industry from collapse," the chamber said.

Chinamasa could not be reached for comment.

Chinamasa said in November the mining sector, which brings in more than half of Zimbabwe's export earnings, shrank for the first time in five years in 2014 due to low metal prices.

The government has set an ambitious target of 28 tonnes of gold in the next five years, to match a record set in 1990. Chinamasa has forecast that gold output could rise to 16 tonnes this year from 14 tonnes in 2014.

"If no immediate measures are taken, the likelihood of production reaching 1990 levels is very slim and in the extreme mines will go under care and maintenance to preserve assets," the mining chamber said.