Sunday, January 22, 2017

Towards Record Gold Output in Zimbabwe

Below are excerpts of the speech by Mines and Mining Development Minister Walter Chidhakwa at the inaugural 2016 Gold Sector Awards held in Harare last Friday.

Hon Walter Chidhakwa

Traditionally, the mining industry has been very important to the economy of Zimbabwe. The sector generates considerable employment, foreign currency earnings, infrastructure development and attracts significant foreign direct investment.

The gold sector, in particular, is estimated to provide employment to more than 200 000 as small scale and artisanal miners and about 10 500 from large scale producers.

The sector is, therefore, estimated to employ about 25 percent of the mining sector’s formal employment.

In 2014, the gold sector generated US$687million which rose to US$737 million in 2015 and US$914 million in 2016 in terms of export earnings.

This sector, and the mining industry in general, has been a central pivot in economic development contributing:
◆ more than 53 percent of the nation’s total exports from 2009 to date;
◆ 7 to 10 percent of fiscal revenue;
◆ about 45 000 formal jobs (and more than 300 000 as small scale and artisanal miners);
◆ more than 50 percent of the $1, 9 billion foreign direct investment inflows since 2009.

Last year, most major minerals recorded higher performance compared to 2015 despite the challenges of depressed international commodity prices, depreciating regional currencies and a firming US dollar that we largely use; and lack of access to affordable funding.

This is also despite the local debilitating factors such as power shortages and the liquidity crunch that were working, not only against mining operations, but the economy as a whole. However, the gold sector defied all odds to become the number one performer.

In line with our ZimAsset agenda, on 14 November 2014, Government announced strategies to revitalise the gold sector through the formation of the Gold Mobilisation Technical Committee, to ensure that the nation derives maximum benefits from the gold sector.

The measures that had been implemented this far has seen a tremendous increase in gold production and deliveries to Fidelity Printers and Refiners. We therefore would like to acclaim players in the gold sector for the tremendous work done.

Role of the gold sector

Zimbabwe’s rich endowment of gold has, historically; lead the country to be ranked as one of the leading gold producers after countries such as South Africa and Ghana, when the country was the third largest producer on the continent. The gold sector in Zimbabwe is mainly comprised of large scale and small scale producers.

While the large scale producers have a full complement of operations, most of the small scale producers do not.

These then take their production to central processing facilities, thereby creating business opportunities for custom milling and other elution plants operators.

The gold sector value chain has diversified giving birth to forward, side and backward linkages, thereby promoting economic multiplier effects through activities such as supplies of goods and services and value addition and beneficiation of the precious mineral.

Historically, the local manufacturing sector provided various consumables to mining companies.

The clarification by His Excellency the President, Cde R. G. Mugabe, early last year on the 75 percent local content aims to develop backward linkages into the manufacturing sector as consumables being produced locally, together with salaries, taxes and other local expenditures, will achieve the 75 percent requirement.

Furthermore, the gold sector continues to play a critical role in the achievement of the value addition and beneficiation policy instituted by Government which has also seen jewelry making companies such as Aurex benefiting from forward linkages developed from the gold sector.

According to Chamber of Mines, in 2015 the gold sector directly contributed 4 percent to GDP, 22 percent to total export earnings, 4 percent to fiscal revenue and 28 percent to foreign direct investment. In 2016, the gold sector further contributed 47 percent of mineral export surpassing other keys minerals such as platinum, nickel and diamonds.

Gold production

The gold sector has traversed an oscillating trajectory over the past two decades.

The highest gold output was recorded in 1999 at 27,1 tonnes which subsequently dropped to 3,6 tonnes in 2008 due to structural challenges such as foreign currency and power shortages.

However, with the institution of various policy measures, gold production assumed an upward trend from the 3,6 tonnes recoded in 2008 to 12, 8 tonnes in 2011; 14,7 tonnes in 2012; 20 tonnes in 2015 and 23 tonnes in 2016.

A significant increase in gold deliveries by the small scale sector was also recorded in 2015, reaching 7,532kg from 3,938kg in 2014, representing 40 percent of national gold deliveries.

In 2016, gold deliveries from small scale producers increased to 9,680kgs.

The small scale gold miners delivered more gold to Fidelity Printers and Refiners in the fourth quarter of 2016 at 3,163,145kgs while the large scale producers delivered 2,958,58kg during the same period.

Large scale gold producers’ deliveries marginally increased over the period as some mines were being mothballed for various reasons ranging from low ore grades, unsustainable power regime, high labour costs and low commodity prices, resulting in unsustainably high production costs.

In 2017, the country’s national gold delivery target is 28 tonnes and I am confident that this target will be attained, if not surpassed.

I would like, at this juncture, to seriously pose a challenge to the gold sector, that if we are able to meet the 28 tonnes by 31st December 2017, I propose to remove royalties for gold which currently stand at 1 percent for small scale producers and 3 percent for the large scale producers. I have already consulted with the Minister of Finance and Economic Development in this regard and we are still discussing this proposal. However, its success also hinges on the gold sector’s uptake of this initiative.

Various intervention and incentives are also in place to increase gold production capacity and these include finalisation and operationalisation of the USD 100 million Gold facilities from South Korea and the USD 20 million gold development initiative from the Reserve Bank of Zimbabwe.

It is with this in mind that before we get down to the business of ensuring we achieve our 2017 target, we start the year by recognising players that have excelled in various categories of the gold industry.

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