GRAPPLING with rampant inflation, unabated foreign currency shortages and a drastic energy crisis, Zimbabwe’s gold production in 2019 succumbed to pressure and eased for the first time in a decade.
— Equity Axis News
Up until 2018, Zimbabwe’s gold production has been on a roll, rising in 10 straight years to reach a highest of 33,2 tonnes in 2018, as artisanal miners anchored production following formalisation of their activities.
Gold production for 2019 was 17% below that of 2018 coming in at 27,6 tonnes. The dearth in gold production is largely attributed to economic challenges mainly on the monetary side, which entrenched in 2018, before the currency overhaul in 2019.
Likewise, power shortages deterred production at big mines which on average produced less in 2019 compared to the prior year. The biggest gold mine in Zimbabwe, Caledonia’s Blanket Mine recently flagged power challenges as one of the major risks facing its business in Zimbabwe.
Side-marketing, particularly at small-scale mines and artisanal operations became rampant as miners chased top dollar for their produce.
The challenges emanating from retention ratios which entailed miners receiving their proceeds in Zimbabwe dollars at 1:1 when in essence prices of goods in the economy were rising meant real value was being lost.
An attempt at redoing the retentions earlier last year, did not help much, with reprieve only coming through once the interbank became functional. Miners could partially recoup value as they would receive the Zimbabwe dollars portion of their sales proceeds at the interbank equivalent of their US dollar (USD) sales.
Further deterioration of the Zimbabwe dollars against the USD and the widening disparity between the interbank rate and the parallel exchange rate, however, lowered the preference for retentions, thus promoting side-marketing.
Likewise, the general economic downturn made doing business much tougher, forcing some players to scale back on production.