Zim mines call for lower royalties, tariffs

GOLD producers in Zimbabwe had asked the government to lower royalties and electricity tariffs to reduce the risk of mine closures, the biggest industry lobby group said last week.

Producers of the precious metal that had fallen 42 percent from a June 2011 record had instituted “survival measures” such as reducing wages and working hours, negotiating discounts with suppliers and replacing contractors with inhouse staff, the Chamber of Mines of Zimbabwe said in a document to the government.

The organisation, which represents companies including top local producer Metallon Corporation, want royalties trimmed to as low as 2 percent from 5 percent now, and power tariffs cut 48 percent to 6.7 US cents (R0.92) per kilowatt-hour.

The strategies “have not helped much as companies continue to operate below their break-even point”, the chamber said.

Reducing

royalties and power tariffs “will assist producers to break even and sustain production, and ameliorate the potential incidences of closure or placements under care and maintenance, whose adverse implications on employment and revenue are far-reaching.”

Mining is the biggest source of foreign exchange for Zimbabwe, which has the world’s largest platinum reserves after South Africa and also has chrome and iron ore.

The government raised or imposed taxes on everything from mines to water over the past 18 months to finance its budget, just as producers grapple with a plunge in metals prices.

Low ore grades that average 2.5 grams per ton contributed to the poor competitiveness of the nation’s mines, the chamber said. Averages in other countries range from 4.2 grams to 18.2 grams a ton.

Production costs for Zimbabwean gold mines average $1 170 an ounce compared with a mean of $878 an ounce for operators elsewhere on the continent, the chamber said. – Bloomberg