Zimbabwe: Gold Mines Close Shop

Zimbabwe: Gold Mines Close Shop

Zimbabwe Independent (Harare)

April 20, 2007
Shakeman Mugari

All gold mines this week stopped processing gold due to an acute shortage of foreign currency needed to import cyanide, a key chemical in bullion production. Miners said the Reserve Bank of Zimbabwe had failed to pay them gold delivered since October last year.

Almost all major mines have closed their production mills because they have run out of foreign currency to import essential chemicals. By Wednesday Isabella Mine, Muriel Mine, Forbes & Thompson and the Canadian-owned Blanket Mine had shut down their plants while underground mining had also been reduced by more than half.

Metallon Gold Zimbabwe, the producer of half of Zimbabwe's gold, had by yesterday shut down its plants due to lack of cyanide. Metallon owns five mines, namely Arcturus Mine in Goromonzi, Mazoe Mine in Mazowe, Shamva Mine, How Mine in Bulawayo and Redwing mine in Mutare.

Group chief executive Collen Gura confirmed that all the five mines under Metallon had stopped processing gold.

"I can confirm that our five mines have stopped processing gold due to lack of foreign currency to import cyanide. We have not been paid by the Reserve Bank," said Gura.

Metallon, which employs 5 000 workers, has also sent its contract workers home due to the crisis.

"It's not a protest sign but there is nothing we can do because we just don't have the foreign currency required to get the key chemicals. Our suppliers are saying they need cash," Gura said.

In his Independence Day address on Wednesday President Mugabe lashed out at the rampant smuggling of precious metals such as gold which, he claimed, was resulting in forex losses.

Gold mines are supposed to receive 67% of their gold sales in foreign currency while the remainder is paid in Zimbabwe dollars at a price of $16 000 a gramme. However, since October they have not received either the foreign or local currency component for gold delivered to the central bank. The regulations state that miners are supposed to be paid half their monies within four days and the remainder within 21 days of gold deliveries.

It is estimated that gold mines are owed US$15 million by the central bank. The crisis is already reflecting in total gold production figures.

Latest figures show that Fidelity Printers and Refiners received less than 700kg of gold in March. It is estimated that deliveries for April could be as low as 500kg.

Gold miners say their efforts to engage the central bank have not been fruitful. Urgent sectoral meetings have been held and SOSs sent to the central bank and government but no action has been taken.

At one such meeting on April 11, mining companies told the Ministry of Mines and Mining Development that they could not continue operating under the current situation.

The Zimbabwe Chamber of Mines told the ministry that some of them were already sinking in debt.

"The gold sector over the past few months has been surviving on available stocks and borrowings, which for some companies is in excess of $1 billion a month," said minutes of the meeting.

The chamber said some of its members were surviving on "lines of credit and leveraging on existing relations with fellow mines and suppliers".

"Existing stocks have run out, suppliers are now insisting on cash upfront before goods are delivered, even some banks are no longer willing to continue to offer loans to gold producers who are not servicing their debts." Gold mines want the support price of gold to be reviewed to about $450 000 per gramme. Central bank governor Gideon Gono could not be reached for comment but is expected to make an announcement on the issue in an interim monetary policy statement scheduled for the end of this month.

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