The Chamber of Mines Gold Producers Association has revealed that the current 60% foreign currency retained by gold producers is inadequate to meet their operational requirements and expansion projects.
Speaking during the ongoing Chamber of Mines of Zimbabwe Annual Conference in Victoria Falls, the Chamber of Mines Gold Producers Association Chairman Qubeka Nkomo said the 40% surrender portion, which is liquidated at the interbank rate, is unfairly compensated due to the disparity between the interbank rate and the hugely depreciated parallel market rate applied by most suppliers.
“Statistics from gold producers show that the optimal retention that allows gold producers to achieve their production targets and expansion projects is approximately 80%.
“To unlock this potential, there is a need to address structural bottlenecks that continue to weigh down the performance and growth of the gold industry.
“The presence of extensive gold deposits coupled with idle capacity presents an opportunity for the gold sector to grow and maximise its contribution to the socio-economic development of the country.
“The gold industry has potential to grow and surpass annual production of 60 tons in the next 5 years, with revenues exceeding US$3.5 billion at current prices,” he said.
He added that the gold industry requires in excess of US$1 billion in the next five years to sustain growth and development of the sector and achieve output targets.
“Local financial market has limited capacity to finance such huge capital requirements on the back of liquidity challenges. Where they are available, they are expensive.
“Foreign investors are demanding gold producers to use their gold as security to secure funding. Some are raising concerns about the current retention framework which they say is not supportive of additional capital injections into the gold industry.
“There is a need for Government to relax the marketing arrangement and allow gold producers to export their gold and use it for capital raising, while also reviewing the retention level,” he added.
The first day of the Chamber of Mines of Zimbabwe annual conference was dedicated to discussing gold and ran under the theme “Unleashing the potential of the gold sector’.