Zimbabwe official gold price hiked to Z$7 billion per gramme
mineweb.com
Even though the official Zimbabwean gold price has been hiked to Z$7 billion a gramme, miners in the hyper-inflation ravaged country say this is still nowhere near enough to meet their costs of production.
Author: Tawanda Karombo
Posted: Friday , 09 May 2008
HARARE -
With inflation hovering around 200,000 percent and with producers opting for the parallel market where a gramme of gold is fetching for Z$7 billion (Z$218 billion an ounce), Zimbabwe's central bank has increased the official support price of gold from Z$700 million to Z$5 billion a gramme as the government desperately tries to cushion gold producers against high-rising costs of production and the country's rampaging inflation.
Last week, the Reserve Bank of Zimbabwe governor, Dr Gideon Gono devalued the Zimbabwe dollar and allowed banks to pay up to Z$200 million for the greenback. Previously the US$ was pegged at Z$30,000. But gold mining sector players yesterday dismissed the gold price hike as lukewarm saying it did not match the exorbitant costs of production that they are incurring.
Several executives from gold mining companies told Mineweb that it was increasingly becoming viable and commercial to sell their product to dealers rather than to Fidelity Printers, the authorised subsidiary of the central bank responsible for official gold purchases.
"We are operating in a difficult environment where what the government and the central bank are giving us in return for the product are not matching," said one such executive from one of Zimbabwe's biggest gold producing companies. "Because of the unviable prices that have been set by the government - including the recent one - we have been left with no choice nor option but to sell our product to a market that is attractive and offers reasonable returns," he added with particular reference to the parallel market where the dollar exchange rate is far higher than the official one..
Under Zimbabwe's laws, only Fidelity Printers can buy gold from producers.
A snap survey carried out by Mineweb yesterday and today revealed that gold dealers from neighbouring South Africa and Namibia have invaded the country with such dealers buying the precious metal from producers for re-sale in the two countries.
"We are calling upon the government to do away with this issue of support prices," said Jack Murewa, President of Zimbabwe's chamber of mines.
This week's hike in the price of gold is the third such hike this year. In January, the price was hiked to Z$100 million at a time when figures showed that the country's gold output had tumbled to a meagre 6 tonnes for the year ended 2007.
Some two months later, Gono hiked the support price for the second time and set it at Z$700 million.
Most gold mining firms inside Zimbabwe are now operating in the red due to the non-payment of the foreign currency component for gold remittances to Fidelity Printers. Although the Chamber of Mines has since written - together with the Confederation of Zimbabwe Industries - to the central bank complaining about the delay in the payment for the foreign currency component of their remittances, only a fraction of the outstanding money has been honoured.
Zimbabwe's gold production slump has been attributed to high production costs, power outages and shortage of critical commodities. Foreign currency shortages to acquire mining equipment, parts and depletion of surface gold ore have also contributed to the decline.
To further compound the gold miners' woes, President Robert Mugabe's government has threatened to take over gold mines that have scaled down production in the wake of constraints. Mineweb recently exclusively reported that Mugabe had targeted RioZim's Renco gold mine and Falgold for such seizure. |
