Gold miners operating at 20% -Zimbabwe Chamber of Mines (03-07-07)

ZIMBABWE’S Chamber of Mines has revealed that gold producers are operating below 20% of capacity while some have suspended operations over the deteriorating economy and operating environment and persistent power cuts.
In a statement made available yesterday the Chamber of Mines said the gol

d industry was operating under a very difficult environment resulting to it operating below 20% of its capacity.
“Most gold producers are operating below 20% capacity with some having suspended operations completely,” the Chamber of Mines.
The chamber earlier this month said gold output was expected to fall by 23% this year to about 8,700 kg from 11,354 kg last year as producers faced serious operational problems.
Under Zimbabwe’s laws, miners surrender their gold to sole purchaser and refiner Fidelity Refiners & Printers, and are paid mostly in local currency and get 40% in hard currency.
Gold is the main foreign currency earner accounting for 52% of total mineral production and a third of export earnings.
The chamber said the Zimbabwe dollar price set last April of Z$35,000 per gram which is US$2,33 on the official market but only US$0,23 on the black market had been eroded by inflation while their local costs soared.
“Some commodities have increased by as much as 818% in two months, yet the (gold) price remains static as if the relevant authorities are not aware of the movement in input costs,” said the chamber.
Electricity cuts for periods of more than 12 hours a day and delays by the Reserve Bank of Zimbabwe to remit the foreign currency component to producers had also hampered production
LISTED counters on the Zimbabwe Stock Exchange have cited the fixed exchange rate for low production levels which has been at $250 to the United states dollar since July 31 last year.
Statements accompanying their financial results released last month, most companies with a foreign currency earning component are unhappy over the static official exchange rate, which has been pegged at $250 when the dollar is being traded above $130 000 to the green back.
Zimsun Leisure Group said in statement accompanying its audited financial results for the six months ended 31 March, that the fixed exchange rate over the reporting period was not ideal for a conducive business environment.
Total foreign arrivals to the group’s facilities grew by 40% compared to 35% achieved the previous year. The group expressed concern on the future prospects of the company with the everincreasing inflation in comparison to the official exchange rate.
“The local economic environment will continue to pose a challenge on operations as inflation is expected to persist on an upward trend and at a faster pace in comparison to movements in the exchange rate,” said Zimsun.
The group owns The Grace Hotel Rosebank, Johannesburg in South Africa and has a signed a lucrative deal with Equatorial Guinea to develop its depressed tourism industry. It has also won a tender from Bauchi State in Nigeria to operate a safari lodge in the Yankari Game Reserve, giving it more foreign currency spinning options.
This will result in the increased inflow of foreign currency to the group when the deals bear fruit. As the 2010 FIFA World Cup approaches, it predicted a rise in tourist arrivals in the country and fears that a static exchange rate will be a threat to its performance.
On the other hand Bindura Nickel Company (BNC) experienced a six percent decrease in nickel sales and has attributed poor performance to the continued fixed exchange rate, which depressed the revenue realised.
“The revenue realised from sales was eroded by the artificially managed exchange rate. BNC did not enjoy the full benefit of the record price prevailing and was constrained in its expenditure, particularly in the payment of competitive remuneration packages. Export proceeds were converted at a static exchange rate of around $99:US$1 for the first seven moths. Thereafter the exchange rate was fixed at US$250 up to the end of the period,” said the group.
Singing from the same song sheet was Cottco on its financial results for the year ended 31 March.
“The inflation adjusted results do not fairly present the true value of US dollar denominated export sales due to distortions surrounding the official exchange rate.
“The distortions of the official exchange rate are relative to actual movements in operating costs, which if taken into account would result in a fairer reflection of the group’s underlying performance,” it said.
Cottco Group produces lint and other products for export and is one of the major foreign currency earners in the country.
Economists said the static rate is not in line with the changing fundamentals prevailing in the country.
“The exchange rate is not in line with the ever increasing inflation. As a result export viability is compromised and that is an automatic fall in revenue,” said a Hararebased economist who declined identification citing professional reasons.

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