Mwana Africa, a mining group listed on London's AIM market, plans to
reopen the Freda Rebecca gold mine, one of Zimbabwe's largest, by
September.
It has been closed for the past three years, a period that was
impossible for gold producers, one sector analyst said, as the
central bank bought gold but failed to pay producers in either foreign
currency or increasingly worthless Zimbabwean dollars.
Today's buoyant gold price, above $900 an ounce, was an important
factor in the decision to reopen the Freda Rebecca mine, said Kalaa
Mpinga, Mwana chief executive.
More important, however, was a series of economic reforms starting with
the dollarisation of the economy – or substitution of foreign
currency as a medium of exchange – sanctioned by the central bank in
January, he said.
In February, the bank allowed gold companies to market their own gold
and accept payment in foreign currency at prevailing spot prices
instead of transferring gold to the central bank. In March the new
unity government cut the tax on gold export revenues to zero from 7.5
per cent, having halved it from 15 per cent the previous month.
Ian Saunders, chief executive of New Dawn Mining, a junior gold miner
in Zimbabwe, said the prospects for the gold industry were so good that
he expected all the big gold producers to restart operations in the
next few months, eventually reaching an annual output of about 500,000
ounces of gold.
He said: Positive changes in economic policy in Zimbabwe are occurring .
The economic reforms, he said, provide us with greater visibility as
we move closer to resuming full-scale gold mining operations and begin
to generate free cash flow in US dollars.
Problems that plagued Zimbabwe's mining industry last year – including
high electricity prices and shortage of skilled labour and equipment –
are likely to endure.
Also, Mr Mpinga said, there was no way to predict the effects of
dollarisation, which have led to deflation in Zimbabwe over the past
two months. There was no alternative, he said. But no one has seen
this before.
Gold producers are likely to find few banks willing to lend to both a
sector – junior mining – and a country – Zimbabwe – that remain
associated with high risk. Mwana is digging into its own cash chest,
which was $26m in October, to fund Freda Rebecca's revival.
Zimbabwe's gold industry is small compared to neighbouring South
Africa, which produced 232 tonnes of gold in 2007. Zimbabwe produced
only eight tonnes of gold in 2007, down from 27 tonnes in 1999.
Economic reforms could create better prospects for the Zimbabwean
platinum industry, an even more important segment of Zimbabwe's
industrial economy. The majority of the world's mined platinum is
divided between South Africa and Zimbabwe.
Financial Times
Post published in: News