Gold miners ask government to cut royalties and reduce power tariffs to survive

Zimbabwe's gold producers have asked President Robert Mugabe's government to cut royalties and electricity tariffs by half to prevent the collapse of mines struggling with low bullion prices, a group representing major mines said.

Gold is Zimbabwe's third-largest export earner after tobacco and platinum and the sector is still trying to emerge from a deep recession between 1999-2008, during which output fell to just 3.8 tonnes, its lowest since independence in 1980, and many mines were forced to suspend operations.

The Chamber of Mines of Zimbabwe, which represents major mines, including large gold producers, told the government in a document that high power tariffs and royalties and a lack of capital were stiffling the sector.

Gold producers want the royalty on gold, levied on the value of what is produced, cut to 2.5 percent from 5 percent and the electricity tariff reduced to as low as 6.7 cents a kilowatt-hour from 12.8 cents.

“These measures will assist producers to break even and sustain production and ameliorate the potential incidences of closure or placements under care and maintenance,” the chamber said.

A senior official from the chamber said the proposals were submitted in September but the government had yet to respond.

Finance Minister Patrick Chinamasa on July 30 cut royalties levied on small-scale gold producers to 1 percent from 3 percent but retained the levy on large mines, who accounted for 63 percent of gold deliveries between January and June this year.

The mining chamber also wants electricity tariffs and royalties to be linked to movements in the price of gold.

The mining chamber said at current bullion prices below $1 150, gold mines were incurring an average loss of $70 per ounce compared with a profit of $76 in 2013.

Gold mines have cut wages and labour hours, renegotiated price reductions and discounts with key suppliers and replaced contractors with in-house staff, but costs remain above current gold prices, the chamber of mines said.- Reuters

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