Govt reviews gold miners submissions

Published: 20 March 2014

Government is reviewing submissions made by gold mining companies pleading for a reduction in royalties to save the industry from potential collapse amid low bullion prices on global market.

Gold mining companies are lobbying Government for a reduction in the rate of royalty and power tariffs applicable to the sector to avoid potential collapse of mines and loss of jobs.

Mines and Mining Development Deputy Minister Fred Moyo said in an interview yesterday that the solution to the threat faced by the gold miners lies both within and outside the country.

"What we must know is that the solution lies both within and outside the country. We must look at the cost structure. We must look at the tariff, efficiency, cost structure and tax regime," he said.

Deputy Minister Moyo said that in that regard, discussions were ongoing between Government and the gold mining sector representatives to find a lasting solution to their plight.

Apart from a reduction in the rate of royalties and power tariffs, gold miners have also called for a reduction in mining fees and charges, market competitive gold refining and tax deductible royalties.

Further, the gold miners are appealing for a centralised rationalisation of unit taxes, the removal of the environmental levy and scrapping of all Environmental Management Agency charges.

Their calls follow the drastic fall in the price of bullion on the international markets from highs of $1 900 per ounce sometime in 2013 to about $1 200 per ounce at the time of submissions.

As such, an external solution that Minister Moyo referred to would come in the form of significant jump in the price of the bullion, which has since edged up to around 1 350 per ounce.

Gold mining firms have warned that at current gold prices, 75 percent of formal gold mining firms were on the brink of closure if there is no significant change to the cost base in the industry.

However, an industry executive said while the Government could intervene to save the situation, the long term solution lies in recapitalisation of the mines to ensure optimal efficiency.

But the executive pointed out that the Government would have to create an environment that makes investors feel comfortable to invest their money in the country's gold mining industry.

While producers have initiated several programmes to reduce operating losses, with some effect on output and employment, fears abound that there will be gold mine closures and loss of export earnings in the short-term unless relief is granted through royalty and power tariff reduction.

In their submission to Government last month through their lobby group - the Chamber of Mines of Zimbabwe - the gold miners said the 2014 National Budget did not address their concerns.

Gold miners said that current problems in the sector, which came to the fore after the fall in the bullion price, were related to historical structural matters linked to cost and investment criteria.

CoMZ said the issues were evident well before the introduction of the multi-currency system.

Zimbabwe's gold mining sector is slowly recovering after declining sharply in the last decade. Gold output reached an all-time low of three tonnes in 2008 having peaked at 29 tonnes in 1999.

Last year, gold output reached 14 tonnes, while this year's target is 17 tonnes.
- The Herald

Tags: Gold,