Zimbabwe’s battered gold miners, reeling under high operational costs, have been given a new lease of life following the alignment of the gold price to international prices, it emerged last week.
Mining executives said new forex measures, which have led to forex being traded interbank, meant that the prices in $Z had gone up astronomically.
In the past, the Reserve Bank of Zimbabwe (RBZ) used an exchange rate of Z$30 000 to the US dollar. The new inter-bank rates have seen the dollar changing hands at Z$204 million.
The new forex rules mean that gold, which traded at $881.47 on Thursday, would fetch upwards of Z$4.5 billion per gramme. This is over 600 percent up from the $700 million per gramme support price announced in February.
Wellington Takavarasha, Zimbabwe Miners Federation CEO, confirmed the new price saying “it is in line with international prices”.
The country’s gold production has been plummeting over the years as the country’s four gold producers Falgold, Metallon, RioZim and Mwana Africa face a myriad of problems.
From a peak of 27 tonnes in 1997, gold production fell to an all time low of 6.8 tonnes last year.
The country’s decline in gold production has raised fears that the country might fail to maintain its membership to the London Bullion Market Association (LBMA).
A loss of LBMA membership would deprive the country of exclusive privileges to sell bullion directly to the international market. LBMA licences gold refineries globally to trade on the world market.
The new prices raise hopes that the country can stem gold smuggling, a rampant exercise over the years.
Smuggling of precious minerals has been on the increase as producers complained of unrealistic prices in the wake of a collapsed economy. Analysts say the prices will breathe life into gold miners. But they cautioned that the industry faces an insurmountable task of keeping its head above the water in the wake of the Indigenisation and Economic Empowerment Act. The Act gives Zimbabweans 51 percent shareholding in all foreign owned companies operating in Zimbabwe. In addition, amendments to the Mines and Minerals Act are on their way. The Mines and Minerals Amendment Bill gives the government free 25 percent shareholding in foreign-owned mines once signed into law.