Zimbabwe’s gold industry is headed for yet another difficult year after output fell to almost a fifth of capacity in 2007, the Chamber of Mines warned. And production in 2008 could be lower yet, said Chamber president Jack Murehwa.
If the slump in production continues, Zimbabwe’s association with the London Bullion Market Association could be terminated in the future.
Runaway inflation, by far the world’s highest at above 100,000% according to government data, coupled with a skewed exchange rate regime has exacerbated mining company’s operational costs. As a result more companies are struggling to match their revenues against the galloping inflation.
Apart from high inflation and a massive skills shortage, gold producers are struggling to organise payments for the gold deliveries they have to make to the Reserve Bank of Zimbabwe.
Zimbabwe is facing a severe foreign currency shortage made worse by the withdrawal of balance of payments support by the International Monetary Fund.
If Zimbabwe fails to produce at least 10 tons of gold, the country faces the imminent prospect of losing its membership to the London Bullion Market Association (LBMA), a grouping of global gold refineries.
The main requirements for membership to the LBMA include having an established track record of at least three years of producing the refined metal; producing a minimum quantity of metal per year – 10 tons of gold and/or 30 tons of silver; and having a tangible net worth of at least £10 million.
The chamber admits losing the membership would be a problem in terms of marketing but reckons there is a way around the problem.
More than 100 mines have shut down since 1998 because of worsening economic conditions while the remaining large mines facing a bleak future. In 2006, mining output declined by 14.4% , while gold deliveries to the central bank fell 18% to 11 tonnes.
– luke
