Financial Gazette (Harare)
Shame Makoshori
11 November 2008
Harare — ZIMBABWE'S largest gold mining group, Metallon Gold, has shut down its five mines across the country, rendering at least 3,500 workers jobless. Metallon, owned by South African mining magnate - Mzi Khumalo, this week closed Red Wing Mine, Shamva Gold Mine, How Mine, Acturus Mine and Mazowe Mine as the nine-year-long economic crisis continues to eat into the country's real sectors.
The Financial Gazette can reveal that Metallon's five mines account for 14 percent of the jobs in the gold mining sector. The company can also extract up to 40 percent of the industry's total gold output.
The mines have been weighed down by the rising production costs and perennial shortages of spares, electricity and foreign currency.
Chief executive officer (CEO), Collen Gura, confirmed the turn of events yesterday, highlighting that output at the mines had dropped from 150,000 ounces per year to 32,000 ounces.
"Metallon has no mine, which is producing gold at all," Gura said.
"It is not that we have decided to close but we have been closed. We had closed three mines first to share the costs on two mines, but we could not cope. We need between US$2 million and US$3 million and no less that Z$500 trillion per month to get Shamva and How Mines running again. With the onset of (the) rains, these mines may (turn into) dams (due to flooding). To de-water them, it will cost more than the value of the minerals underground. There is a risk we might lose the mines," Gura added.
Last month, the Chamber of Mines of Zimbabwe bemoaned the non-payment of gold delivered to Fidelity Printers and Refiners for pushing gold miners to the brink of closure. The Chamber said at least US$30 million was still outstanding.
Two other mines are currently teetering on the verge of collapse.
Turk Mine, about 55 kilometres north of Bulawayo, stopped production recently and was placed on care and maintenance because the mine is still to be paid US$3 million.
Golden Valley Mine has also stopped operating after the country's power utility, ZESA Holdings, halted electricity supplies to the mine over an unpaid debt. The mine, situated close to Kadoma, has also not been paid for gold delivered to the central bank.
The central bank has been trying hard to share the little foreign currency available among competing national needs in the wake of donor fatigue and reduced export earnings.
With the country failing to access critical balance of payments support from the Bretton Woods institutions and other multilateral funding agencies, the government has struggled to generate funds needed to import medicines, food, chemicals and agricultural inputs among other things.
The ready cash from gold mining and other exporting sectors is being shared to avoid a potential catastrophe.
But with interest rates hovering around 9,500 percent, borrowing from the banking sector to fund the mines' working capital requirements is proving to be unviable.
"If you borrow $3 trillion on Monday it doubles to $6 trillion on Wednesday and a further three days down the line the amount is $12 trillion. We are on a rollercoaster and as far as Metallon is concerned we have been burning. Metallon Inter-national has been funding us but they are now stretched, and the business is threatened," said the Metallon Zimbabwe CEO.
Gura urged the government to consider extending cheap funding to gold miners as has happened with the agricultural sector through the Reserve Bank of Zimbabwe (RBZ)-funded Agricul-tural Sector Produc-tivity Enhancement Fund.
He however, said it may take about six months to get Metallon's mines running again assuming a rescue package was made available this week.
"Red Wing Mine, for instance, runs under Mutare River and we are always pumping out water that percolates into the shaft.
"We did not have foreign currency to buy pumps. The incessant rains complicated the situation because we needed bigger pumps. The mines flooded, and they are still flooding. Very soon the water will be flowing out of the shaft, all the equipment underground will be flooded and corroded. To pump out that water it will cost more than the value of minerals underground. But the point that I want to bring out here is; deny a mine liquidity and you close it down, it is very critical in mining.
"Understandably, the RBZ has been trying to help but a little too late. We are supposed to be paid in four days but our first quarter starting Octo-ber was bad for us," he added.
Metallon has been planning to spend an additional US$64 million in Zimbabwe before listing on the London Stock Exchange.
The projects have been shelved pending an improvement in the investment climate and the payment for gold deliveries, according to Gura.
Gura revealed how the acute cash flow problems at the mines had exploded to alarming proportions to the extent that in the past two months the Group could not pay its staff.
The result has been a large-scale flight of skilled workers into neighbouring South Africa and Botswana.
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