THE central bank said yesterday it had mobilised US$50 million to fund Fidelity Printers and Refiners to accelerate gold production in Zimbabwe. The move came as the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said Zimbabwe’s battered economy’s mineral export revenue would be driven by gold in the next five years. The amount would be used to fund “Fidelity’s own mining projects and also support viable gold projects”, Mangudya said.“The view of the Reserve Bank is that gold production must be accelerated. The Reserve Bank as the primary market for all gold produced locally through Fidelity Printers and Refiners would want to see a market and policy driven growth in gold production to buttress the Ministry of Mines and Mining Development’s gold mobilisation programme,” Mangudya said.
He said Fidelity shall enter into an agreement with the Zimbabwe Mining Development Corporation (ZMDC) for the establishment of a special purpose vehicle to exploit gold under Fidelity’s ZimGold.
The State-run ZMDC already operates about three gold mines, which have been run down by mismanagement. ZimGold will be a vehicle wholly-owned by Fidelity. It will control gold production initiatives as well as channelling of funding Greenfield projects in alluvial gold mining as well as reef gold mining. The joint venture with ZMDC will be entered into with ZimGold on a 50-50 basis, while another joint venture with equal partnership will be entered into for the supply of mining chemicals and explosives.
Mangudya said this was all part of the RBZ’s Accelerated Gold Production Initiative, which is expected to ramp up gold output to 30 tonnes per annum by 2020, from about 13 tonnes per annum currently.
“This (US$50 million) fund will finance Fidelity’s own mining projects and also support viable gold projects. The Accelerated Gold Production Initiative’s vision is to increase gold production to 30 tonnes per year by 2020, i.e. revenue of around US$1,5 billion at current prices. This target is achievable as in 1999, the country produced its highest ever gold tonnage at 27 tonnes,” said Mangudya.
He said ZimGold would focus on harnessing low hanging gold resources with particular emphasis on alluvial and prolific reef deposits supported by bulk open pit mining and on old underperforming assets as a preferred mining method to enhance gold deliveries. “ZimGold will structure its operation such as to provide for contract gold mining and own gold mining. It will also acquire interest in brownfields projects and venture capital gold structures to boost production,” the RBZ governor said.
His strategy was viewed with both optimism and caution, with analysts yesterday saying due care should be taken in projects partnering with the ZMDC before huge capital outlays were pumped into projects involving ailing and badly run State enterprise. Others said market fundamentals were forcing Mangudya to shift strategy and allow Fidelity into business ventures.
“The governor is agreeing that it is a seller’s market,” said Takunda Mugaga, head of research at Econometer Global Capital. “He has realised that if you are a buyer you lose, you need to be mining. He is trying to close the gap by taking an arm of the central bank into mining. But he has to recapitalise Fidelity, otherwise it will be another holder of claims without utilising them,” he said.
Mangudya said the central bank had arranged a US$18 million to bolster the capacity of the embattled Hwange Colliery Company Limited to purchase equipment. A key player in the provision of coal for firing ailing industry, Hwange, the country’s major producer, has been harmstrung by ageing equipment. It has run into losses against the background of swelling debts. Several interventions to revive Hwange have faltered mostly due to shareholder wrangles, which could continue to erode shareholder value unless steps are taken to bring peace in the boardroom.
“This is necessary to enable Hwange Colliery to be able to supply the requisite coal needed for the generation of electricity by the Zimbabwe Power Company (ZPC) mainly at Hwange Thermal Power Station,” Mangudya’s statement said.
“Platinum exports in mate form at around US$45 million per month (or around US$540 million per year) are quite impressive. This makes the construction of a platinum refinery an important development that requires to be accorded a national project status to ensure that all the platinum is beneficiated in Zimbabwe. The Reserve Bank shall continue to monitor developments under this project as it is an essential source of export revenue to the country,” the statement said.