$1bn needed to revive gold sector

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Zimbabwe’s gold mining sector needs $1 billion over the next five years to get the industry back on track, a consultant for TSX- and Aim-listed Caledonia, which operates a gold mine in the country, said on Wednesday.

Speaking at a gold conference in Johannesburg, Trevor Pearson said Zimbabwe had seen almost a complete hiatus in spending on its mines over a ten-year period up to 2009/10, resulting in most operations falling into a dilapidated state.

In 1999, the country’s yearly gold production peaked at 28 000kg, but almost immediately started a rapid decline in line with political upheavals that beset the country, bottoming at 3 100kg in 2008 when the economy collapsed and the central bank stopped paying mines for deliveries.

After the economic recession and the establishment of government of national unity, the industry started a slow recovery, but was once again tripped-up by uncertainty indigenous policy matters brought with it.

Pearson said an investment of about $120 million this year could see the first eight mines being refurbished and starting production.

“We are seeing a strong gold price, and mining companies are ready to start up some mines, but are being blocked from acquiring the necessary offshore funds, because of indigenisation issues. Companies that are able to generate some funding of their own have committed up to about $10 million to spend this year on projects.”

The estimated gold production in Zimbabwe for 2010, was about 8 000kg, and this year production is set to increase by 30% to 40%, but Pearson stressed that significant further progress could be made in the development of the gold industry if policy issues were sorted out.

“Mining companies that are currently operating in country would like to see the indigenisation being incorporated as a moderate process that provides for the growth of the industry, but not just to seek to trap all revenue.

“The more economically viable the Zimbabwean government makes its mining industry, the more revenue it will be able to also generate for the State,” added Pearson.