Forex crisis: RioZim suspends operations at 3 mines

RioZim, Zimbabwe’s second largest gold producer, has stopped production at its three gold mines after running out of imported inputs, a sign of widespread distress across the country’s mining sector.

Operations at Kadoma’s Cam and Motor Mine and Dalny, and at Renco Mine in Masvingo, have been suspended, the company said in a letter of distress sent to the Reserve Bank of Zimbabwe.

“As you are aware, the stocks of critical imported consumables and spares ran out due to an acute forex shortage including cyanide, activated carbon, caustic soda, explosives, forges steel balls, spares for the repair of crucial equipment and numerous other items,” board chairman Lovemore Chihota wrote to central bank governor John Mangudya.

RioZim has only received 14% of its forex allocation since it agreed a deal with RBZ to received half of its earnings in foreign currency. No allocations at all have been received over the past nine weeks, Chihota said.

RioZim has proposed that it be allowed to retain 100% of its foreign currency earnings in order to allow it to restock. RioZim further proposes to be allowed to keep 60% of its export earnings.

RioZim believes it can produce 165kg of gold per month and ramp up monthly output to 300kgs, if allowed to keep more of its gold sales.
The company proposes this as a “once off” measure, but across the industry, miners are pushing for Government to completely do away with the retention scheme and allow them to keep all their foreign currency.

Large scale gold producers are allowed to retain 30% of their export proceeds. However, last week, gold producers warned of widespread mine closures as “these retention thresholds are no longer adequate to cover production costs”.

Suppliers of key inputs such as processing chemicals, spares and other equipment now demand foreign currency, and the few that still accept local RTGS payments have raised their prices six fold.

“If this situation is not addressed, the majority of gold mining houses, whose going concern (status) has been undermined, may find it impossible to continue in operation,” the mines said.

Earlier in October, RioZim announced it could take RBZ to court over its failure to pay the 30% forex earnings due to the gold producer. “The situation is thus unsustainable and prohibits the Company’s ability to operate viably and maintain its production,” the company said, adding it was only receiving half of its allocation.

RioZim says its plan to build a new Biological Oxidation Plant at Cam & Motor Mine was now at risk.

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