Zimbabwe: Gold revenue up 48 percent

Zimbabwe: Gold revenue up 48 percent

After slow production during the Covid-19 lock down, Zimbabwe’s gold sector has had a drastic come back reporting gold revenue is up almost 50 percent at least one of its major mines.

The total revenue recorded for the second quarter of 2020 clocked an impressive US$23.6M, that is almost double (48 percent) the revenue brought in during the same period last year.

Having topped last year’s production by US$15.9M, Blanket Gold Mine that is based in the Gwanda region, increased production all through the first quarter this despite glitches caused by the Covid-19 pandemic.

The mine is owned by the Caledonia Mining Corporation and was proud to announce it had produced 14,233 ounces of gold in the second quarter up from the 11,948 produced during the same period last year.

The production level is very impressive given the fact that other miners could not access inputs like explosives because the country was short of cash. When Zimbabwe went into lock down to curb the spread of Covid-19, the country was effectively locked out from accessing US dollars which would have to be flown into the country.

Since the airlines were grounded, the amount of dollar supply fell drastically and miners could not access funding for their inputs. However, it is during this same period that Caledonia owned Blanket Gold Mine operated at 93 percent of initially set targets.

As a result, Caledonia Mining Corporation posted a gross profit of US$10.6M at the close of the first quarter which is a 146 percent increase. Comparatively, the mine only wrecked in US$4.3M at the same time last year.

According to local media in the country, the group reported earnings before interest, taxes, depreciation and amortisation (EBITDA) of US$10.2M, a 162 percent increase on the US$3.9M in the first quarter of 2019 at a margin of 43 percent.

Improved working conditions

The management at Caledonia attributes the improved productivity to better working condition in the country. In the first quarter alone, operating costs were much lower than they were last year. While production costs were at the high of US$1039 per ounce, this yea, that cost dropped to US$879 per ounce.

The Chief Executive Officer of the company, Mr. Steve Curtis attested to this fact saying there is an improved operational environment in Zimbabwe.

“In parallel with the improved financial and operating performance, I am also pleased to report an improved operating environment in Zimbabwe. Although the country continues to face challenges, the introduction of the interbank rate early in 2019 allows us to better protect our workers from the effects of high inflation,” he told local media in a recent interview.

Pleased with their performance, he cited improved conditions to include a steady and more affordable power supply. Previously, there was a major setback in getting consistent and reliable power supply which greatly affected production at the mine.

“The interruptions to the supply of electricity from the grid which we experienced last year have largely been addressed,” he said.

This year, the government of Zimbabwe has allowed for the miners to enter into power-purchasing contracts rather than to rely on the national grid. The contracts tap into imported power supply from neighbouring countries.

Nonetheless, there is still a major power deficit which gravely affects the production of gold. Most mines are forced to result to the use of diesel-powered generators to keep operations going. Others like Blanket Mine have opted to invest in modern solar projects to supplement their power needs from the grid.

According to the CEO, “…the coronavirus pandemic had no appreciable effect on Blanket or Caledonia during the quarter because lock downs were only implemented by the Zimbabwe and South African governments to manage the virus at the end of the quarter,” he told media.

He said the mine was able to maintain operations at the highs of 93 percent their normal target by using “…its stocks of consumables and implementing measures to safeguard employees.”

Also read: Gold demand up, Tanzania capitalizing, Zimbabwe losing

Covid-19 lockdown blocks input supply

Just a few weeks ago Zimbabwe reported that gold production was down 17 percent in the last four months, that is the span of the first quarter.

This first half of the year has seen prices of gold shoot up us investors attempted to shake off the Covid-19 threat by choosing to store their money value in the precious metal. Yet in Zimbabwe, small scale miners in the country said they cannot conduct their mining activities because the country does not have the needed cash to buy mining inputs.

Zimbabwe relies on other currencies like the US dollar to make large and small payments and at the mine, it means buying inputs like explosives. To get the dollar into the country requires flying it in and that’s where the problem was.

Since the outbreak of Covid-19, flights had been grounded so Zimbabwe could not access the dollar which it needs to buy mining materials.

“We cannot buy our inputs…we need explosives, we need diesel, how can we buy them when there is no money?” queried small scale miners.

Worse still, even when gold was delivered to the Fidelity Printers and Refiners (FPR), the Reserve Bank of Zimbabwe and the monopoly in gold dealings, FPR did not have money to pay for it. FPR reported that it was struggling to import cash by air transport to pay for gold deliveries due to restrictions caused by the Covid-19 pandemic.

Source: The Exchange