Zimbabwe to Lose Exclusive Gold Rights

Financial Gazette (Harare)
17 January 2008
Posted to the web 17 January 2008

By Shame Makoshori
Harare

ZIMBABWE could this year lose exclusive rights to sell gold directly to the international markets after failing to produce a benchmark output of 10 tonnes of gold last year required to maintain membership with the influential London Bullion Market Association (LBMA).

Preliminary figures obtained by The Financial Gazette indicate that the country's embattled gold mines failed to produce enough to meet the target.

LBMA accreditation is the recognised surety of quality international gold buyers considered before purchasing the metal from any refinery or country.

To be admitted into membership, countries have to produce at least 10 tonnes of gold per year.

A loss of the LBMA membership would mean Zimbabwe would be forced to sell gold through intermediaries who charge exorbitant fees to facilitate the trade, reports have indicated.

Thabani Ndlovu, a Ministry of Mines and Mining Development permanent secretary, said in December that the country needed to produce an additional 3.5 tonnes of gold to meet the minimum target.

"The government is concerned about the decline in amounts of gold being remitted to Fidelity Printers," Ndlovu told a stakeholders meeting.

Mines Minister Ambassador Amos Midzi could not be reached for comment at the time of going to print.

Fidelity Printers and Refiners, a subsidiary of the Reserve Bank of Zimbabwe (RBZ), the sole buyer of all gold produced in the country, is a member of the LBMA.

Provisional gold output figures for 2007 compiled by the Chamber of Mines shows that output for the year fell short of meeting the minimum threshold imposed by the LBMA on members.

Chamber of Mines chief executive Douglas Verden recently said in an interview that the chamber estimated gold output to plunge by 33 percent to 7.5 tonnes in 2007.

"Nearly all minerals have shown a decline, these are just estimates," Verden told The Financial Gazette.

"We project gold to decline by 33 percent to 7.5 tonnes in 2007. The only areas where we expect improvements will be those that are not important," he said.

Platinum output is also expected to have declined by between three and four percent, the chamber's figures suggest, while chrome output is seen down 12 percent.

The major factors that have contributed to the decline of production in the gold mining sector include erratic power supplies, foreign currency shortages and erratic payments.

The chamber estimated that the industry was owed US$20 million by Fidelity Refiners in December 2007 for gold deliveries made last year.

Erratic payments to gold producers began in September 2006 but intensified in 2007.

Production output for most minerals have also been affected by the uncertainty that shrouds the economy, which has been fueled by hostile laws proposed by the government to enable it to expropriate shareholding in foreign owned mines.

With agricultural output during the 2007/2008 seasons expected to decline due to high rainfalls and input shortages, the plunge in gold output could deal a further blow to an economy that is already struggling to create opportunities for job seekers due to high inflation.

About 40 000 workers are estimated to have lost employment in mines in the past decade.