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Rumbidzai Zinyuke Business Reporter
The majority of gold mines in Zimbabwe will be closed down in just three months as companies are struggling to remain viable due depressed prices and high royalties and taxes being charged by Government, the Chamber of Mines of Zimbabwe said yesterday.
Addressing a Parliamentary Portfolio Committee on Budget, Finance and Economic Development, Chamber of Mines chairman for the gold producers committee Mr Ian Saunders said there was need for the Government to review the policy on royalties and taxes on mining companies to encourage the growth of the sector.
Minister Chinamasa proposed royalties for large scale gold producers to be raised from 7 percent to 8,75 percent while royalties for small scale miners increased to 3,75 percent.
This is in addition to various taxes, charges, levies and fees that miners are required pay.
Global gold prices fell 28 percent last year, notching up its biggest annual decline in 32 years as prospects for global economic recovery prompted investors to switch to riskier assets.
Gold prices reached all-time highs of US$1 920,30 an ounce in September 2011 but ended at US$1 201,13 per ounce on December 31, the last day of 2013.
“There are serious viability issues in the gold industry and our assessment is that, within 90 days, 75 percent of the gold mines in this county will be shut unless there are policy changes. “In short, royalties are too high,” said Mr Saunders. He said the gold mining industry was facing the same challenges that other sectors of the economy were experiencing but the challenges were being exacerbated by high royalties and taxes. He said focus needed to be placed on primary production of minerals.
“We must understand that Zimbabwe is a primary producer of minerals and all efforts must be focused on the growth environment of the primary sector,” he said. “In our view there is no policy thrust to fundamentally drive primary mineral exploration, development and growth in the industry. It must be understood that no single producer could build a refinery hence Fidelity Printers built one and no single platinum producer can build a refinery but three platinum producers together can build a refinery.”
Speaking before the same committee, second vice president of the Chamber of Mines Mr Toindepi Muganyi said platinum mining companies were likely to miss the 2015 deadline to build a refinery.
“In terms of the penalty on unprocessed platinum by January 2015, the platinum industry will be found flat footed because the timing will be difficult to adhere to because the construction of various processes to realise value addition require a longer time than that,” he said.
He said there was need for further consultations that would encourage a balance between a vibrant mining industry and a wider revenue base for Government from royalties and taxes.
He said the impact of the non-deductibility of royalties introduced by Government in the 2014 budget had increased royalties of diamonds from 15 percent to 18, 75 percent. Platinum royalties increased from about 10 percent to 12,5 percent.
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