Source: Forex shortages hurt miners – DailyNews Live
Memory Mataranyika 1 October 2018
HARARE – Foreign exchange restrictions via a government directive to
control 85 percent of receipts were hammering precious metals miners in
Zimbabwe, said executives at platinum group metal (PGM) and gold mining
companies who added that the restrictions meant they only realised a
portion of the value normally due to them from their mineral exports.
Mining companies negatively affected include Anglo American Platinum
(Amplats) and Impala Platinum (Implats), and gold miners RioZim, Metallon
Corporation and Caledonia Mining Corporation.
Under Zimbabwean law, bullion producers sell production through the
central bank. Platinum producers market their production independently,
but together with gold mining firms, they have to surrender 85 percent of
their forex receipts to the central bank. In return they receive local
bank transfer funds which the government rates at 1:1 to the US dollar.
Then they line up to get their foreign-denominated payments cleared by the
central bank which is delaying effecting such transactions owing to forex
shortages. This is crippling to mining operations, managers told Miningmx.
The chairperson of Zimbabwe diversified mining group, RioZim, revealed
this week that the company was only receiving 15 percent of its gold
revenues in hard currency. He highlighted that in effect, this means that
its gold mines – which include the large Renco mine – were selling bullion
for only about 50 percent of its real market value.
“The group … only received some 15 percent of its gold production
earnings in foreign currency with the balance being paid through local
Real Time Gross Settlement System (RTGS or local bond notes transferred
electronically),” said Lovemore Chihota, chairperson of RioZim.
“Regrettably, the purchasing power of RTGS has been steadily falling …
the company is therefore losing circa 50 percent of the real monetary
value of its gold sold.”
RioZim and other precious metals miners in Zimbabwe have “… been exposed
to procuring goods locally at a cost of up to 300 percent of the actual
fair value,” he added. This has led to operating challenges: Metallon has
had to stop operations at some of its mines as it battles to stay afloat
under the current economic environment.
While Metallon was unavailable for comment, its chairperson Mzi Khumalo
said earlier this month that after meeting the country’s Mines minister
Wintson Chitando, it may have to pay suppliers in gold. This would help
it bring in “equipment needed” to boost production. “We need the support
of the minister on foreign currency shortages so that we get our supplies
in,” said Khumalo.
Alex Mhembere, CEO of Implats’ 85 percent-owned Zimplats, told Miningmx
his company was leaning on close collaboration with the Reserve Bank of
Zimbabwe to manage forex restrictions. “There are more people that require
forex so we have to share. We are getting good support; where we need more
forex, they come to the party and when they need more we also come to the
party,” he said in an interview.
Zimplats did not specifically need forex for its own payments, but for the
support of “our suppliers who require forex to service their equipment and
to import” spares and other implements. “In terms of Zimplats we are up to
date with our foreign payments,” he said.
Inability to access foreign currency exposes mining companies to
“inflationary pressures in the procurement of consumables from domestic
suppliers,” said another mining executive.
– Miningmx
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