[miningmx.com] – PATRICK Chinamasa, the Zimbabwean finance minister reduced royalties on gold producers from 7% to 5% in a bid to incentivise growth in the mining sector which is now faced by a negative growth of 1.9% for this year.
Zimbabwe is a resource- and agro-based economy whose manufacturing and industry sectors are wobbling. The mining sector has, however, been showing signs of recovery and was expected to be leading the country’s economic revival.
Mining groups such as Impala Platinum, Anglo Platinum, Metallon Gold and Rio Tinto all have exposure in the mineral rich Southern African country.
However, said mining industry executives on Thursday, the sector is struggling to realise its true potential owing to persistent constraints such as power outages and investor concerns rooted in the operating and regulatory framework.
It was against this background that Chinamasa moved to cut the gold royalty payment after gold producers complained the levy was adding to a vast array of taxes and other compulsory payments mining companies had to make.
“We insisted in our presentations that the royalty was affecting the viability of the gold producers especially,” said a chamber of mines of Zimbabwe executive.
“We await to hear what members say on this review, but at least the government is listening to concerns coming from the mining industry,” he said.
During the eight month period to August, gold production in Zimbabwe went up to 8.8 tonnes compared to 8.5 tonnes produced during the same period last year.
Platinum production for the first half period amounted to 6,435 kilograms, forcing a downward production revision for 2014 from 14,000 to 13,200 kilograms.
Chinamasa admitted that “mining sector is showing potential” and urged companies to explore existing deposits.
Zimbabwe has the world’s second largest platinum reserves after South Africa and also boasts of vast coal, gold, chrome and nickel deposits.
“In 2014, the mining sector was initially projected to grow by 10.7%, largely driven by anticipated increased output for nickel, coal, gold and diamonds,” Chinamasa said in his mid-term fiscal policy review statement.
However, he added, “weak international prices for some minerals, frequent power outages, obsolete equipment and inadequate funding for recapitalisation undermined performance” of the sector during the first half of the current year.
These challenges had resulted in “subdued” output for gold, platinum and diamond and “necessitating a downward revision of sector growth to -1.9%”.
Ian Saunders, the chairperson of the chamber of mines committee on gold producers said last month that Zimbabwe was at risk of failing to attain the 15 tonne target for gold production that is required for re-admission into the London Bullion Market.
