By Varaidzo Zhakata
THE nation’s largest gold producer, RioZim, has been forced to halt production due to incapacitation that has resulted in the firm failing to meet operational costs.
RioZim highlighted that the imposed foreign currency retention threshold and the pegged exchange rate by the Reserve Bank of Zimbabwe allowed it to collect only 80 percent (%) from the sale of the mineral.
According to the threshold, gold mining firms are obliged to submit 30% of their foreign earnings to the central bank, hence causing them to close down at a current fixed rate of the ZW$ for every US dollar, which according to the firm, means it’s getting less for gold sales, contrary to the prevailing international market price.
The group said earnings are insufficient to cater for expenses incurred during operations and to pay employees.
Previously, in 2018, RioZim temporarily closed operations at some of its mines namely Cam and Motor Mine, Dalny, and Renco Mine after it failed to acquire the much-needed items used in the extraction of the mineral due to cash shortages.
These items include cyanide, activated carbon, explosives, and spares for the repair of equipment among other items.
During this period, RioZim solely condemned the central bank for the failure to access foreign currency to bring in critical inputs.
“The impact of this situation on the company’s operations has been that the company is no longer able to meet its operational expenditure requirements considering that the company is required to pay for electricity and fuel in USD, along with almost all of its consumables and spares also being denominated in USD,” stated RioZim.
A similar incident previously occurred in February 2019, with RioZim temporarily shutting down its operations on the grounds that it had “…experienced significant and persistent delays in payment of its foreign currency allocation for deliveries made to Fidelity Printers and Refiners”, a situation which had harshly “…affected the viability of the company’s operations.”
The firm expressed discontent over amends done by the central bank, which states that producers shall be paid under a 70-30 payment arrangement in terms of which 70% of gold sale income shall be paid into the producer’s Nostro account, while the remaining balance of 30% shall be settled in local currency at the pegged exchange rate, into the producer’s Zimbabwe dollar account.
The mining giant added that it also has to deal with delays in receipt of gold sale earnings from the country’s sole gold buyer and exporter FPR, which two weeks back, alerted miners that it was facing difficulties in importing cash on time due to restricted air traffic movement caused by the coronavirus pandemic.
Currently, RioZim is owed US$2.4 million and $65.5 million by FPR.
By Varaidzo Zhakata