Thursday, May 7, 2009

Rush to open Zimbabwe mines as gold output down

2009-05-06 17:00:00
By Geena Paul
In a year which saw soaring gold prices and demand, everybody is eyeing a country with 1,00,000 per cent inflation. That is Zimbabwe, which is reeling under severe inflation and internal problems. Still international miners are eyeing Zimbabwe because of its abundant gold mines. Mining is Zimbabwe’s one major source of economy. But Draconian laws had been blocking the mining industry from expanding business in Zimbabwe. Following this, the government has been working on new rules for mining in the country. Now, the country has implemented these laws and gold producers are re-opening mines shut down in Zimbabwe. As a result of the new set of rules, the companies can sell gold directly in world markets which was not the case earlier.
The rush to re-open the mines comes at a time when Zimbabwe’s President Robert Mugabe administration is seeking to revitalise the economy. Zimbabwe’s wealth of mineral resources could attract some daring investors. However, Zimbabwe’s gold output came down by around 300 kg between January and April 2009 compared to 1,407 kg in the same period last year. The reason for this is a wave of gold firms shut down mines leading to near halt in output in the face of sharply rising costs and frequent power cuts. A key stumbling block to mining investment in Zimbabwe — which has the world’s second-biggest platinum reserves and hefty deposits of diamonds, coal and nickel — is a law limiting foreign ownership of mines to 49 per cent. But government has indicated that it was prepared to reconsider allowing investors to have more than 49 per cent shareholding, depending on the size of their investment. Gold producers already in the country have jumped at the opportunity presented by the central bank, which in February relinquished its role as sales agent for gold, allowing firms for the first time to sell the metal and retain all the proceeds. Zimbabwe’s central bank, which owes gold miners millions of dollars, plans to repay this in special foreign currency bonds. A number of gold firms that had shut down their mines, leading to near-cessation in output are now seeking funds to resume operations. The country’s biggest gold producer, Metallon Gold, London-listed Mwana Africa and Canada’s New Dawn Mining Corp are all planning to re-open their gold mines within months. According to the new law, companies can keep all the proceeds from sales of gold mined in Zimbabwe and a number of firms, including Metallon Gold, Caledonia Mining, New Dawn Mining and Mwana Africa, are now planning to re-start production on properties in the country

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