Currency shortages threaten gold mines

Zimbabwe's gold production has been hit by foreign currency shortages, with monthly output dropping by up to 45 percent
in April, mining industry sources told IRIN on Monday.

James Maposa, the president of the Zimbabwe Chamber of Mines, said that total national gold output this year may fall by up to 45 percent of the 28 mt produced last year. "The lack of inputs such as cyanide and explosives creates a potential for a further reduction in production," Maposa said.

Zimbabwe's gold mining companies have faced difficulties in meeting payments of some US $8 million to their suppliers, most of whom are in South Africa. "The credit facilities have been put on hold. The suppliers won't deliver and we may grind to a halt," warned Maposa. He added, however, that his
chamber is in discussion with the government and the central bank about the situation. "We are hopeful that a solution can be found."

A Zimbabwean supplier, who imports cyanide for local gold mines, told IRIN that mining companies are not allowed to operate foreign currency accounts. "This forces gold mining companies to sell their production to the central bank, which pays them in local currency," said the supplier.

She added that the companies must then buy foreign currency for supplies at a "parallel" rate from banks, which is up to 40 percent more than the fixed rate of 38 Zimbabwean dollars to one US dollar. "Gold mining companies are struggling at the moment," the supplier said, adding that there is a serious possibility of what she called aggressive reductions in the 30,000-strong
labour force in the industry.

Zimbabwe is Africa's third biggest gold producer after South Africa and Ghana. Its gold exports last year - amounting to US $240 million and nearly all of it from the country's 25 largest gold mines - accounted for about 30 percent of Zimbabwe's export earnings.