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Zimbabwe’s miners are in “a very difficult” situation as the slump in commodity prices coupled with huge overheads is preventing them from realising meaningful margins, Mines and Mining Development Deputy Minister Fred Moyo has said.

Deputy Minister Moyo, an experienced miner, said in an interview this week that most mining firms, particularly gold producers were selling commodities at prices almost at par or even lower than total production cost, making them increasingly uncompetitive.

“While we limped on when there was a prices boom, it is going to be very difficult (with the current prices). With high overheads and low prices, the situation is quite difficult. I hope a lot of them will be able to align costs just to stay above water to break even and hang in for a while . . . we will be very happy,” said Deputy Minister Moyo.

The major cause of the fall in mineral prices especially in platinum, iron ore and gold has been due to ramped up production by major global producers from Africa and Australia and generally depressed global demand.

In China, the world’s second largest economy for example, slowing industrial trends and deteriorating property fundamentals are having an aerse impact on bulk commodity demand, in particular prices of iron ore and thermal coal which have hit five-year lows.

“This is a real issue of concern for the country and Government since the mining sector contributes significantly to the national revenue,” economist Dr Gift Mugano said.

Under the current situation, the deputy minister pointed out key issues that need to be immediately addressed to ensure survival of the local miners. These include addressing costs of utilities, particularly rail and power, re-aligning taxation and cost of labour.

“Companies must not only ask for Government to reduce taxes, but also deal with internal issues such as the cost of labour not only at any level of general workers, but starting at board level. The whole point is looking at ways of achieving efficiency.”

Deputy Minister Moyo said there was need to re-focus on small scale miners, particularly gold and chrome, which incur lower costs. By incurring lower overheads, small scale miners have the capacity to insulate themselves from lower prices.

Dr Mugano concurred that there was need for the Government to review the multiple taxes choking the sector.

“It is a question of protecting the goose which lays the eggs,” he said.

The current status of affairs which has seen a number of mining firms retrenching has a double effect of loss of export revenue and other tax income anticipated by Government.

In the near future, to curb the volatility of international commodity prices, Dr Mugano said there was need for a well calculated approach to encourage value addition within the industry without necessarily choking the industry due to short deadlines.

“The issue of value addition in the mining sector needs to be addressed in a balanced and informed manner for the benefit of all stakeholders,” said Dr Mugano.

Source : The Herald