A lot has been happening in the gold mining industry lately. It is folly to not take this industry seriously because it is very significant to Zimbabwe’s GDP. Zimbabwe has a gold capacity of 13 million tonnes, of which roughly 600 tonnes have been mined in the past 40 years. When looking at gold reserves per square kilometre, Zimbabwe is second-placed globally. Mineral exports locally contribute at least 60 per cent of the total export earnings. Mining contributes as much as 16 per cent of the local GDP. Thus, it is apparent that mining is a big deal in Zimbabwe. Herein I shall discuss some of the interesting developments that have been happening regarding the gold mining sector.

No More 55 Percent US Dollar Part Payment For Large Scale Gold Producers

For a while now, anyone selling their gold at Fidelity Printers and Refineries was not getting full payment in US dollars. They were getting 55 per cent in US dollars and 45 per cent in the local currency. Rates applied have always been those of the interbank market. It is reported this has been reviewed and payments will now be made on a 70/30 ratio. It has been said this was borne out of relentless calls by miners who were not happy with the prior arrangement. Fidelity will now be paying US$45 per gram for the best quality gold. Fidelity Printers and Refineries recently issued a press statement as follows:

“With effect from the 26th of May 2020, the gold trading framework in Zimbabwe has been reviewed as follows:

  1. Gold producers shall be paid under a 70/30 payment arrangement scheme in terms of which 70% of the gold sale proceeds shall be paid into the producer’s Nostro account and the balance of 30% shall be paid in local currency at the ruling exchange rate into the producer’s ZW$ account.
  2. Small scale gold buying agents and artisanal producers shall be paid in cash at a flat price of forty-five United States dollars [USD45.00] per gram of fine gold.
  3. Large gold buying agents must have a mining operation producing a minimum of fifty (50) kilograms fine gold per month to qualify for a Fidelity Printers and Refineries (FPR) agency permit.
  4. Small scale gold buying agents will have to enter into an Agency Agreement with FPR, which contract shall clearly spell out the terms and conditions under which the agents shall operate.
  5. FPR and the National Gold Monitoring Teams are enhancing surveillance to ensure that all gold is sold through FPR in line with the country’s regulations.

 

All persons wishing to continue as FPR gold buying agents are advised to contact Fidelity Printers and Refineries to regularise their operations in line with the new gold trading framework.”

Let Us Talk About The FIXED Gold Price

As you can see from point number 2 above, small scale gold miners will get their gold bought using a flat price of US$45 per gram. For those of you who know how gold prices are internationally, you will know that prices change from time to time. A fixed price can at times be less than the international price. For instance, the global gold price was at US$56 per gram at the time the flat price development was announced. The Zimbabwe Miners Federation has already expressed concerns over having a fixed gold price.

As much as small scale miners are looking to get better prices for their gold, the government also benefits if the fixed price framework is scrapped. Ideally, small miners will not sell their gold to FPR if they are offering lower margins. They will look for alternative (illegal) markets and treasury will lose out on the much needed foreign currency. Thus there is a need for a balance to be struck and that can be done by reviewing the flat price arrangement.

It is reported that as much as half of the gold produced locally is finding its way to the parallel market. This all happens because of favourable prices on the parallel market that FPR will not be offering.

Government has been citing the COVID-19 pandemic as the reason why their foreign currency reserves have been low. Thus they have not been in the position to properly pay for gold producers’ gold. It is even reported that there are arrears of gold producers whose gold has not yet been paid – about a 2-week long backlog of payments. The Zimbabwe Miners Federations has called for a win-win scenario to be enacted.