The US $1,1 billion gold haul

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Africa Moyo
GOLD exports are set to generate US$1,1 billion this year, up from US$750 million last year, as prices outshine other metals and local producers increase output, Government says.

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Earnings from the sector will represent 30 percent of Zimbabwe’s projected revenues — at US$3,7 billion — for the year. As at October 31, 2016, gold deliveries had topped 17,3 tonnes against the targeted 24 tonnes for the year.

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Though the new 2016 revenue projection is 32 percent more than last year’s haul, it falls short of the US$1,3 billion that was initially forecast by Government at the beginning of the year.

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Growing revenues, particularly for the gold mining sector, have raised expectations that overall revenues from mining might soar to US$2 billion this year.

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It underlines the centrality of mining to Zimbabwe’s economy, considering the country’s US$4 billion 2016 National Budget. Mines and Mining Development Deputy Minister Engineer Fred Moyo told The Sunday Mail Business last week that additional investments by Government, especially for small-scale miners, would increase gold output even further.

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“This year we are going to achieve US$1,1 billion. So we have already surpassed that. In our budget, I think we have estimated about US$1,3 billion. I think we will end up at US$1,1 billion; we have already done US$1 billion.

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That is why we were saying we should be looking at US$2 billion (worth of exports), because, all in all, I think this year it would be US$1,9 billion.

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“I was hoping that we would do US$2,2 billion . . . with what the Governor (of the Reserve Bank of Zimbabwe, Dr John Mangudya) has done to support us with the US$20 million facility. I don’t see why we shouldn’t push it up to above US$2 billion,” said Eng Moyo.

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Last year, gold miners pocketed US$684 million from 18,4 tonnes. Gold contributions by platinum miners — Unki, Zimplats and Mimosa — increased revenues to US$750 million. Gold is one of the constituent minerals of platinum ore.

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Metallon Gold, Zimbabwe’s biggest gold producer, and other majors accounted for more than 30 percent of annual total output and have been increasing production.

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In the third quarter of 2016, the miner — which is controlled by South African businessman Mr Mzi Khumalo — produced 26 622 ounces from 22 565 ounces a quarter earlier.

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Prices
This year’s earnings have been tempered by relatively lower prices as compared to last year’s. Though low, they have bucked the trend of other retreating commodity prices and climbed from US$1 063 per ounce on January 2 to US$1 268/oz by March 6. (An ounce is about 28,4g.) By July 8, gold was being quoted at US$1 366/oz — the highest for the year so far.

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Since then, prices have softened and by last Thursday gold was selling at US$1 184/oz. Market watchers are optimistic prices might end the year at US$1 400/oz. Some local pressure groups believe gold deliveries and foreign currency receipts will rise exponentially if gold possession is decriminalised.

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Recently, RBZ boss Dr Mangudya told miners in Zvishavane that the central bank would engage Government on the matter. He, however, noted that decriminalisation could be conditional to the sale of the gold to Fidelity Printers and Refiners, a unit of the apex bank.

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FPR is the country’s sole gold buyer. Last week, Eng Moyo had a meeting with the police and representatives of small-scale gold producers where he hinted the decriminalisation agenda was progressing.

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“I am starting the programme (of decriminalisation of gold possession). “The Governor (of RBZ) has made his position clear; he has spoken to Ministry of Mines, Ministry of Home Affairs but we can’t go against the law until the laws have been sorted, but we can apply the law in a manner that allows the sector to function,” explained Eng Moyo.

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Small-scale rally
Since the beginning of 2016, small-scale artisanal miners have been ramping up production. From January to October 2016, small-scale producers delivered 7,5 tonnes of gold compared to 9,8 tonnes from big miners. Despite remarkable output and deliveries from artisanal miners, they still continue to fall foul of the law.

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Recently, a Mberengwa woman was sentenced to a two-year jail term for possession of gold worth US$10, while, a Gokwe man was slapped with a five-year sentence for possessing gold valued at US$24 without a prospecting licence.

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The central bank opines law enforcement agencies need to be temperate in the way they deal with artisanal miners.

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“I think we need to allow artisanal miners to mine their gold and take it to FPR so that we generate more foreign currency and import fuel, raw materials and other issues,” said Dr Mangudya recently.

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Agriculture and mining are the key pillars of Zimbabwe’s economy. While gold exports are raking in between US$13 million and US$15 million every week, tobacco earnings since the beginning of the year have risen to US$720 million. Last year, tobacco exports grossed US$800 million.

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London Bullion Exchange
This year’s forecast gold deliveries of 24 tonnes are three tonnes shy of the record 27 tonnes realised in 1999. They, however, represent a solid recovery from the 3,6 tonnes recorded in 2008, which resulted in disqualification from the London Bullion Market Association (LBMA).

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LBMA is an international trade association representing the London market for gold and silver bullion, and has a global clientelle. Being part of it guarantees members reasonable prices compared to those offered on volatile open markets.

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Government has stated its intention to rejoin the LBMA as production is surpassing the critical threshold of 10 tonnes annually.

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