Zimbabwe’s 40-tonne gold target may be elusive

Gold deliveries surged by 33,5 percent to 3,5 tonnes in July from 2,6 tonnes in June attributable mainly to improved production by the artisanal and small-scale miners segment.

ZIMBABWE’S gold production increased by 33,5 percent in July, but the target of 40 tonnes set for 2024 cumulative production remains elusive.

The country’s gold sector continues to show sturdiness, with a significant growth in deliveries to Fidelity Refinery in July.

Gold deliveries surged by 33,5 percent to 3,5 tonnes in July from 2,6 tonnes in June attributable mainly to improved production by the artisanal and small-scale miners segment.

According to statistics, the gold delivered in the first seven months of 2024 totalled 17,2 tonnes as the country races to attain the budgeted 40 tonnes by the end of year.

This leaves the gold sector with a target of producing 22, 8 tonnes between August and December this year.

In June, cumulative deliveries to Fidelity stood at 13,78 tonnes which was a modest decrease from 14,1 tonnes attained in the comparable period last year.

Large-scale miners delivered 1,2 tonnes in July, representing a 15 percent growth from the preceding month. Small-scale miners, who contribute circa 67 percent of Zimbabwe’s gold sales, delivered 2,34 tonnes in July, translating to a 45 percent surge from June, highlighting their centrality in the country’s gold production mainly in a turbulent operating environment.

Although there was a positive trend in July, the general overview for 2024 remains oblique.

At 7, 74 tonnes, second-quarter deliveries, were 28 percent ahead of the first quarter, but marginally lower than the 7, 98 tonnes delivered in the same period of 2023 confronted by a myriad of challenges encompassing funding and unrelenting power outages.

Key primary gold producers in Zimbabwe, which comprise Kuvimba Mining House, Caledonia Mining Corporation and Padenga Holdings, have already set targets for the year.

Padenga is anticipating a production range of up to 85,000 ounces this year, while Caledonia is targeting up to 78,000 ounces during the same period.

“Recurring blackouts, particularly in 2024, further exacerbate the situation. The country has experienced its worst blackouts since 2017-2018, with outages reaching 16 hours per day, in July and August. ZESA’s average production of 1,200 megawatts falls short of the peak demand of nearly 2,000 megawatts.

“Side marketing, driven by better prices offered by informal market buyers, has also resulted in significant gold smuggling. Estimates suggest a loss of US$200 million to US$500 million annually due to illicit gold smuggling. This practice, coupled with underpayments by Fidelity, discourages miners from delivering their gold to the state-owned entity,” said Equity Axis in its weekly publication.

The Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube, is on record that Zimbabwean gold is being smuggled to destinations such as South Africa and Dubai among many others.

The mining sector has the potential to improve from its current growth levels, but it continues to be held back by various challenges, including inconsistent power supply.

Lack of electricity has had a significant impact on operations in Zimbabwe, a country which relies heavily on mining for foreign currency earnings and employment.

Without a reliable and sufficient supply of electricity, mining operations are disrupted or even come to a complete halt, a position that has led to production and profitability decline on the part of primary producers.

Power outages have lately been affecting the mining business in a big way specifically for firms that are not connected on dedicated power lines.

Lack of long-term capital is another stumbling block in the realisation of a sound mining industry, which typically requires large investments in equipment, infrastructure and exploration to develop and maintain operations over an extended period.

Without access to long-term capital, mining companies are struggling to finance investments, thereby limiting their ability to grow and remain competitive in the industry.

Gold has been Zimbabwe’s main export, contributing nearly 30 percent to total exports, and is expected to contribute US$4 billion annually up from about US$2, 7 billion in 2018.

Gold also serves as a crucial component for gold-backed coins and supporting the newly introduced national currency, the Zimbabwe Gold (ZiG).

In 2022, Zimbabwe produced a record 35,3 tonnes of gold, while the output decreased to 30,1 tonnes in the following year due to operational challenges, power constraints and obstacles faced by small-scale miners.

Gold remains an important export mineral, securing Zimbabwe’s foreign currency receipts and significantly contributing to the country’s economic stability.-ebsinessweek