HARARE – A dire power crisis that has crippled Zimbabwe in the past eight months has hit gold mines hard, with output plummeting by 28,7 percent during the fist half of the year, according to the African Development Bank (AfDB).
It says this will militate against the gold sector’s 34 tonne target for 2019.
Ultimately, Zimbabwe projects to mine 100 tonnes of gold by 2023, but analysts see this number as overly ambitious given the negative factors that have returned to haunt the sector, including rife smuggling.
Power outages of up to 24 hours a day have been roiling the country since January.
And across sectors, output has been declining, leading to fears of sustained recession in the southern African country that is fighting a sharp surge of inflation.
“The recent decline in gold deliveries may be attributed to more pronounced power outages and smuggling of the precious mineral, especially by small scale miners,” AfDB said in its report released on Monday.
“However, the Reserve Bank of Zimbabwe, through Fidelity Printers and Refiners, has increased the gold development initiative fund for small-scale gold miners to ZWL$200 million from ZWL$150 million in an effort to encourage miners to deliver their gold through formal channel,” the report noted.
“Gold deliveries for 2019 continue to register poor performance as total deliveries registered about 12,31 tonnes in the first half of 2019, a 28,7 percent decline from the same period last year,” AfDB said.
It said of serious concern was the sharp decline in the volume of gold coming out of small-scale miners, the hardest hit by the power crisis.
The small-scale sector has been contributing most of gold in Zimbabwe.
“Both primary producers and small-scale miners registered a decline in deliveries of 33,8 percent and 19,9 percent, respectively. The fact that small scale miners registered pronounced decline for the first half of the year may pose some challenges to meeting the target, given that small scale miners have been driving gold production from 2016,” said AfDB.
Small scale miners output grew consistently from about 3,05 tonnes in 2015 to 3,98 tonnes, 4,63 tonnes and 11, 03 tonnes in 2016, 2017 and 2018 respectively, which translated to a half yearly growth of 30,7 percent, 16,2 percent and a phenomenal 138,4 percent growth.
Zimbabwe’s large-scale gold mines have the capacity to generate $4 billion worth of revenue to the economy in the next five years, according to Thomas Gono, chairman of the Chamber of Mines of Zimbabwe’s Gold Producers Association.
However, at least $1 billion in fresh capital would be required by the sector to achieve this target.
“It is not an elusion that we can achieve 100 tonnes of gold output by 2023,” said Gono, who spoke during a gold mining symposium attended by more than 300 delegates at the opening of the 2019 mining industry annual conference in May.
“We can actually contribute $4 billion by 2023 and make significant contribution to foreign direct investment. But the gold sector requires in excess of $1 billion in the next five years to sustain the growth and development of the sector to achieve the 2023 target,” Gono noted.
He said a number of factors were militating against growth, including power cuts of up to seven days a week, and the foreign currency shortages that have lately seen a number of mines contemplating “suspending operations”.
He said gold revenues had increased to $1,35 billion in 2018, from $110 million in 2008, due to improved policies, but government had to make sure the operating environment remained perfect in order to encourage investment into the sector.
“We have a support in our society of 1,5 million people under the small-scale mining sector alone. So, government cannot afford to ignore our requirements. Gold mines employ 12 000 jobs directly, which is 25 percent of the total jobs in the mining industry. And there are 33 000 jobs indirectly,” he said.
He described the period 2005 to 2012 as the lost decade for Zimbabwe’s gold sector.
“We have not done well enough,” he said.
“Our production declined to 3,5 tonnes in 2008 but at the time gold prices rose to $1 800 per ounce. We regard this as the lost decade. But from 1999, if we had increased production annually by five percent, we would have reached 50 tonnes of gold in 2018, instead of the 35 tonnes that we produced,” said Gono.