Fixed costs haunt ZMDC gold operations

Published: 07 July 2014

The Zimbabwe Mining Development Corporation needs to realign its costs to current production levels to be able to revive its gold mining operations, parliamentarians heard today.

Giving oral evidence to the parliamentary portfolio committee on Mines and mining development, ZMDC acting general manager Wilson Chinzou said the mines were operating on fixed costs that were derived when they were still operating at full capacity and making profits.

"These mines were structured on capacity to produce a fixed amount of gold and the costs were structured in such a way to achieve those production levels. And we are talking about fixed costs going up to about 80 percent of the total cost, which really affected the ability of the mine to make profit.

"Fixed costs are hard nuts to crack and we were not able to align those costs to the level of production as it fluctuates throughout the years, which meant we were making loses at a certain level because of the high fixed costs," he said.

ZMDC owns Elvington mine, which was shut down more than 10 years ago when the main shaft collapsed due to intense faulting and inadequate pillar support in the area, Jena and Sabi mines which are also struggling.

Chinzou said the mines needed more than $45 million to ramp up production.

"We lack geological information because exploration has been neglected for many years due to lack of funding. So we are working on raising funds for exploration to justify end production," he said.

He said ZMDC also needed to replace the old mining techniques still being employed at the mines with newer technologies that yield higher production.
- BH24

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