Mining is the biggest source of foreign exchange for Zimbabwe, which has the world’s largest platinum reserves after South Africa and also has chrome, and iron ore.
The government in this year raised or imposed taxes on everything from mines to water over the past 18 months to finance its budget, just as producers grapple with a plunge in metals prices. Gold and platinum account for over half of Zimbabwe's total mineral exports. Last year the country earned $2 billion from minerals. Government has designated mining, which accounts for 11 percent of the gross domestic product, to anchor growth in the medium term.
Gold producers in Zimbabwe asked the government to lower royalties and electricity tariffs to reduce the risk of mine closures, the biggest industry lobby group said. The organization, which represents companies including No. 1 local producer Metallon Corp., want royalties trimmed to to as low as 2 percent from 5 percent now, and power tariffs cut 48 percent to 6.7 U.S. cents per kilowatt-hour. As such, the miners have appealed to Government to cut the royalty rate to between 2 percent and 3 percent from 5 percent and to whittle down the power tariff to 6,7 cents from 12,8 cents per kilowatt hour.
The strategies “have not helped much as companies continue to operate below their breakeven point,” the chamber said. Reducing royalties and power tariffs “will assist producers to break even and sustain production, and ameliorate the potential incidences of closure or placements under care and maintenance, whose adverse implications on employment and revenue are far-reaching.”
Production costs for Zimbabwean gold mines average $1,170 an ounce compared with a mean of $878 an ounce for operators elsewhere on the continent, the chamber said. Gold has dropped 8.9 percent in the past year, and traded at $1,106.33 an ounce at 11:30 a.m. in London Friday.
Zimbabwean gold mines loss making large-scale gold producers require an estimated $600 million to recapitalise over the next five years, as they battle viability problems due to low global prices and high costs.
About $130 million is immediately needed to ramp up production, retool and enhance efficiency, the Chamber of Mines of Zimbabwe said. This would help producers to increase production from an average annual growth rate of 2 percent to over 10 percent in the medium term. "Thirty percent of the total capital requirements will be sustaining capital while the remainder is ramp up capital," the miners' lobby group said.
