Zimbabwe loses out in global gold rush
Monday, 16 July 2007
HARARE, July 15 (AFP): Skyrocketing inflation, erratic power supplies, a skills shortage and a dearth of foreign exchange have combined to ensure Zimbabwe is missing out on a global boom in gold prices.
While global prices for gold hit a new record high in May, the potential benefits for manufacturers and miners are being rapidly eroded by the collapse of the Zimbabwean dollar.
Instead the mining firms are nervously waiting to see if Zimbabwean President Robert Mugabe carries out his threats to nationalise companies that he says are allowing precious metals to be smuggled out of the country as part of a Western inspired plot to topple his beleaguered regime.
"It's like a vicious circle as we are not benefiting from these high international prices," said Mark Verden, chief executive officer of the Zimbabwe Chamber of Mines.
"The problems we have are so many. Some of our gold miners have not been paid since November last year and yet they need to import most of their raw materials."
The world price for gold now stands at around 655 US dollars an ounce, only slightly down on the record of 688 an ounce which was recorded in May.
But while the increase has led to a rise in profits elsewhere, Zimbabwean firms have found themselves out of pocket as they can only sell their product at a fraction of the market price to the government.
Only 60 per cent of the money they receive in return is paid in hard currency while the balance comes in the increasingly worthless local Zimbabwean dollar.
For example, when the central bank sells gold to the international market it is paid 650 US dollars per ounce, yet local producers receive just 62.34 US dollars an ounce from the authorities.
Overall gold production in Zimbabwe is this year expected to drop to about 8,700 kilogrammes from 11,354 last year, a far cry from 27,000 produced in the industry heyday in 1989.
Eric Kahari, chairman of the mining house Rio Zim, said that while 2007 has been good in US dollar terms, he was concerned that the company had not been paid for its gold since November last year by the central bank.
"This has created considerable cashflow constraints for your companies with a number of projects having to be deferred and creditor obligations being breached," Kahari said in a statement to shareholders. Although the southern African country is endowed with vast reserves of minerals such as palladium, chrome, platinum, gold, diamonds, copper, coal and nickel, exploration activity has declined in recent years.
While global prices for gold hit a new record high in May, the potential benefits for manufacturers and miners are being rapidly eroded by the collapse of the Zimbabwean dollar.
Instead the mining firms are nervously waiting to see if Zimbabwean President Robert Mugabe carries out his threats to nationalise companies that he says are allowing precious metals to be smuggled out of the country as part of a Western inspired plot to topple his beleaguered regime.
"It's like a vicious circle as we are not benefiting from these high international prices," said Mark Verden, chief executive officer of the Zimbabwe Chamber of Mines.
"The problems we have are so many. Some of our gold miners have not been paid since November last year and yet they need to import most of their raw materials."
The world price for gold now stands at around 655 US dollars an ounce, only slightly down on the record of 688 an ounce which was recorded in May.
But while the increase has led to a rise in profits elsewhere, Zimbabwean firms have found themselves out of pocket as they can only sell their product at a fraction of the market price to the government.
Only 60 per cent of the money they receive in return is paid in hard currency while the balance comes in the increasingly worthless local Zimbabwean dollar.
For example, when the central bank sells gold to the international market it is paid 650 US dollars per ounce, yet local producers receive just 62.34 US dollars an ounce from the authorities.
Overall gold production in Zimbabwe is this year expected to drop to about 8,700 kilogrammes from 11,354 last year, a far cry from 27,000 produced in the industry heyday in 1989.
Eric Kahari, chairman of the mining house Rio Zim, said that while 2007 has been good in US dollar terms, he was concerned that the company had not been paid for its gold since November last year by the central bank.
"This has created considerable cashflow constraints for your companies with a number of projects having to be deferred and creditor obligations being breached," Kahari said in a statement to shareholders. Although the southern African country is endowed with vast reserves of minerals such as palladium, chrome, platinum, gold, diamonds, copper, coal and nickel, exploration activity has declined in recent years.