[November 07, 2008]

Gold Miners in Distress Call

Harare, Nov 07, 2008 (Financial Gazette/All Africa Global Media via COMTEX) --
THE country's gold producers, collectively owed in excess of US$30 million by the central bank, sent out an SOS to government this week asking for urgent intervention before the industry collapses, The Financial Gazette learned this week.

In a statement issued on Sunday, the Chamber of Mines said the industry cannot fund working capital and development capital needed to sustain operations owing to delays in releasing the payment.

Exploration work at the mines has also ceased, holding back future developments.
Two gold mines are currently on the brink of closure as a result.
Turk Mine, about 55 kilometres north of Bulawayo, stopped production recently and was placed on care and maintenance because the mine is still to be paid US$3 million owed by the Reserve Bank.

Golden Valley Gold Mine has also stopped operating after the country's power utility halted electricity supplies to the mine over an unpaid debt. The mine, situated near Kadoma, has also not been paid for gold delivered to the central bank.

Under the country's laws, all gold mined locally must be sold to Fidelity Printers and Refiners, a subsidiary of the central bank.

The Bank pays 75 percent of the total value of the gold in United States dollars directly to the producers' foreign currency account with the 25 percent balance being paid in local currency at an exchange rate determined by the central bank.

Because of the precarious foreign currency situation in the country, the central bank has been swamped by the demand for hard currency.

The bank has had to withhold certain payments in order to meet some of the critical requirements such as drugs, electricity and fuel, all of which are imported.

The biggest challenge for the bank has been the preparations for the new agricultural season. Once again, the country has been caught flat-footed, with no sufficient inputs, which the central bank is augmenting through imports.

But the miners were adamant this week that they needed the US$30 million before the onset of the annual shut down by South African suppliers, who will not accept new orders after mid-November.

"Unless the gold industry is paid all its outstanding balances within a two week period, the funds will be received too late to try to initiate and complete the purchasing cycle before the year-end shutdown in South Africa.

"If the outstanding funds are paid too late then the South African factories typically open and take orders around mid January.

Assuming the industry then starts the process of ordering, then the goods will probably be received mid March. Little gold production will be realised during the first quarter of 2009," said the chamber.

The Cha-mber of Mines also came out rejecting allegations of rampant leakages of the bullion.
Reserve Bank governor Gideon Gono has previously blamed illegal dealings for the decline in gold production.

"For the past four years we used to export about 27 tonnes of gold yearly, but it has now gone down to less than five tonnes. The gold is going into private hands of some of those in authority," said Gono.

The chamber said there was no evidence that gold leakages have occurred in the formal gold sector.
"There is absolutely no evidence that gold leakages have occurred in the formal gold mining sector and there has been a permanent presence on most of these mines of CID and RBZ officers, as well as international auditors for some time, without adverse reports having been received," said the Chamber.

Analysts however, warned that the Chamber could force the RBZ to expose those mines that might have skeletons in their cupboards.

Efforts to get comment from mines minister Amos Midzi were fruitless.

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