Mining firms feeling the heat

MINING firms are feeling the heat of the pandemic, which has depressed production, demand and prices for most minerals as well as exchange control rules on liquidation of forex holdings.

The Chamber of Mines of Zimbabwe (CoMZ) chief executive Isaac Kwesu said except for gold, international prices of most minerals were lower, which has affected access to capital as well as working capital.

Mr Kwesu said mines were under pressure from exchange control laws that compel liquidation of unused forex after 30 days, a period miners feel is too short.

The remarks come amid concern of lukewarm participation of exporters on the auction, despite the country holding over US$1,1 billion of hard currency in nostros.

Minerals are the biggest earners of forex in Zimbabwe, followed by tobacco exports.

Gold raked in US$1,3 billion last year. Minerals earn Zimbabwe over US$3,5 billion yearly.

Mr Kwesu, however, said mines already contribute on the auction through the 30 percent they sell to the central bank upon receipt, while the balance should be utilised or liquidated if not used in 30 days.

“Miners are given 30 days to utilise their money or liquidate it on the auction market, which is a very short period indeed given the gestation for their usage goes beyond.

“So if the miners are compelled to liquidate their forex in 30 days while they still have commitments relating to operations. The processing of invoices takes longer, probably requiring an extra two weeks, so you find that miners may not be in a position to liquidate their forex holdings and some suppliers are paid only after delivery.

“Because of logistical challenges relating to Covid-19, some orders are taking as long as 90 days to be delivered so you only pay them afterwards,” he said.

Mr Kwesu said mining firms were experiencing inadequate forex to meet their requirements.

The CoMZ CEO also pointed out that even gold miners were under pressure for limited capital and working capital funds with some of the major minerals experiencing decline in production volumes.

He said discussions were ongoing with authorities to iron out sticky issues, especially regarding compulsory liquidation. “Miners are engaging on the issue, this (liquidation in 30 days) is a new and revised policy less than 30 days old.”

He said with regards to rules for compulsory liquidation of forex, miners are under pressure to pay for goods ahead of delivery because they risk having the funds converted into local currency.