OLD Mutual Zimbabwe (OMZ) has urged small-scale miners to organise and formalise their operations to access part of the US$25 million the group is channelling into the mining sector, primarily to support renewable energy solutions.
Gold production in Zimbabwe has soared, with Fidelity Gold Refinery anticipating gold deliveries will rise to 45 tonnes by year-end, exceeding initial projections of 40 tonnes.
Since the start of the year, the gold price per ounce has surged by over 50% to US$4,252.97.
In an interview with businessdigest, OMZ chief investment officer Benjamini Sithole said small-scale miners should organise themselves to take advantage of the US$25 million fund.
“The off-taker is the one who knows they have got contracts with the small-scale miners and can advance the money that would have been lent to the off-taker to give to the small-scale miners for equipment and other things,” he said.
“So, that arrangement is one that would work. We need an off-taker, we need an aggregator, and we need them to be organised. Then, it will allow financial institutions to fund them. Miners can make use of that to have new solar systems for their mines.
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“When you put in a solar system, some miners can put a hydro system in their areas, which can power their mines. So, it is another opportunity that is available for miners.”
Many small-scale miners face challenges related to exploration, which requires significant capital investment.
“So, exploration is difficult for financial institutions. Unfortunately, you need a different type of funding because exploration, with the type of funding that banks and financial institutions have, is difficult to support, as they are not yet sure of the resource,” Sithole said.
“Normally, they want to come when the resource has been confirmed. There is a resource statement that confirms that indeed there is a resource, measured and indicated, and then they can come in and reach financial flows.”
He explained this was typically the case with exploration, as the miner may sometimes fail to make a discovery, making it difficult to justify using depositors’ or policyholders’ money for such ventures.
“So, it is another level of risk that needs a different type of funding, such as venture capital, capital lease, shareholder equity, private equity, and things like that,” Sithole said.
Some small-scale miners have been lobbying banking institutions to accept their mining claims as collateral for loans.
“It is still difficult at the moment for banks to take those claims as collateral because for banks, their main business is really banking and they do not want to hold on to claims for which they might not know about the resource base and other details,” Sithole said.
“So, some forms of collateral that may be acceptable to banks may be immovable property and other equipment. Using claims is still a little bit complicated. We need to refine the laws around small claims and the transferability of those claims.”
Mineral earnings are expected to reach US$7 billion by the end of this year, buoyed by surging gold prices and a recovery in commodity prices for other minerals.