Zimbabwe targets 40 tonnes of gold

Gold deliveries to Fidelity Printers and Refiners (FPR), the country's sole authorised buyer of the mineral, jumped 137 percent in the first two months of 2022 to 5,1 tonnes from 2,17 tonnes in the same period last year largely driven by Government incentives that have helped prevent smuggling.

Traditionally, January and February are characterised by low gold deliveries as most operations are affected by the rains.

In June last year, the Reserve Bank of Zimbabwe (RBZ) introduced a 5 percent incentive for those who deliver more than 20 kilogrammes a month.

Royalties were also cut.

Latest FPR statistics show that small-scale miners delivered more gold at 3,4 tonnes compared to 1,8 tonnes by primary producers in January and February.

Last year, small- and large-scale gold producers delivered a cumulative of 29,6 tonnes, representing a 55,5 percent increase from the 19,1 tonnes delivered in 2020.

While large producers contributed 11,2 tonnes in 2021, small-scale producers hauled in 18,5 tonnes.

FPR is targeting 40 tonnes this year, leveraging on current incentives and timeous payments for deliveries.

Chamber of Mines of Zimbabwe (CoMZ) vice president Mr Thomas Gono said the target is attainable.

"The 40-tonne target is very achievable if the current policies are maintained and not tampered with because they have increased the incentive to produce."

CoMZ has been engaging Government to refine the policies even further.

"We have written to the Government that the retention ratio should be increased to 80-85 percent in order to see the mines expand and be sustainable," Mr Gono added.

It is believed that consistent and adequate power supplies could lower the cost of production as well as avoid disruptions.

Economist Mr Allen Dube said an increase in gold deliveries at a time when prices were rising on the international market would naturally result in increased revenues for the fiscus.

With such high production of the country's third-largest foreign currency earner, the hope is that gold prices on the global market should continue to rise in order to get more foreign currency to cushion the economy."

Gold prices have risen nearly 18 percent so far in 2022 to around US$2,050 per ounce as investors seek safe haven, especially due the Russia-Ukraine conflict.

US-based investment bank Goldman Sachs forecasts prices to rise another 25 percent to US$2,500 an ounce by year-end.

According to Dr Prosper Chitambara, an economist, "the high prices are an incentive to produce and we will see increased production this year. They also discourage smuggling as a safer selling procedure is preferred by all."

Increased foreign currency earnings will likely temper inflation and provide resources to support the auction market.

Gold is one of Zimbabwe's largest single foreign currency earners.

The yellow metal generated US$1,61 billion in exports last year, accounting for 26,7 percent of total exports.

In 2020, owing to depressed prices, earnings dropped to US$982 million, accounting for 22,4 percent of total inflows.