One of Zimbabwe’s biggest gold miners RioZim has stopped mining operations due to skyrocketing operational costs following the central banks foreign currency trade framework for gold producers.
In a cautionary statement to its shareholders, RioZim said it was only receiving 80 percent of its total earnings because of the imposed retention threshold by the Reserve Bank of Zimbabwe (RBZ).
Fidelity Printers and Refineries (FPR) requires gold miners to surrender 30 percent of foreign currency earnings to the RBZ, which liquidates at the fixed exchange rate of ZW$25 for every US dollar.
In effect this regulation prejudices RioZim twenty percent of its earnings from gold sales compared to the international market price, which level of earnings, it said, was not enough to cover operating expenses.
RioZim says it is now facing viability challenges as it faces mounting costs including imported power and a restless workforce demanding wages in foreign currency.
Currently the company is also owed US$2.4 million and $65.5 million by FPR and it currently blames the central bank for the failure to access foreign currency to bring in critical inputs.
Rio Zim also indicated that it is also facing delays in receipt of gold sale proceeds from the country’s sole gold buyer and exporter FPR, which in turn is also facing forex access challenges.
Fidelity told miners recently that it is also facing challenges in accessing foreign currency due to international travel restrictions and restricted air traffic movement caused by the coronavirus pandemic.
RioZim in a cautionary statement, told its investors and shareholders that the situation has become untenable as it is required to meet its operational costs in foreign currency.
“The impact of this situation on the company’s operations has been that the company is no longer able to meet its operational expenditure requirements considering that the company is required to pay for electricity and fuel in USD along with almost all of its consumables and spares also being denominated in USD,” reads part of the cautionary statement.