The Zimbabwe Miners Federation (ZMF) cry foul of the new gold trading framework saying it does not provide a win-win situation between the buyer and gold miner, a situation likely to promote side marketing as miners seeks better margins.
This comes barely a day after the country’s sole yellow metal buyer, Fidelity Printers and Refiners (FPR) announced a new gold trading framework which provides for a flat price of US$45/ gram delivered by small scale producers and a 70/30 framework for large scale gold producers.
ZMF president Henrietta Rushwaya said the review was invariably long overdue. It is a relief from the 55/45 framework that prevailed prior to the new Framework. While the review is a welcome development, she said, the fixed price of US$45/ gram was announced at a time the world price of gold was at around US$54.8/ gram, representing almost 80% of the world price.
“With the world price of gold expected to continue bullish and further increase on the back of global economic risks arising from the Covid-19 pandemic which promotes the attractiveness of gold as a safe haven, the price paid to local small scale miners will continue to shrink as a percentage of the world price.
“The unwanted consequences of the above pricing distortion are widespread side marketing and leakages as small-scale miners seek better margins from unregistered buyers offering attractive prices,” she said. Rushwaya said the sustainability of such a trading framework is also questionable when the price of gold is coming down, for instance to prices lower than the US$45/ gram.
“ZMF is of the view that in that situation, it will not be practically possible for FPR to continue paying the fixed US$45/ gram (which will be technically a price support scheme) given the current liquidity constraints in the economy,” she said.
“ZMF believes in a gold trading framework that provides a win-win situation between FPR and the gold miner which minimizes or eradicates the discrepancy between the world price of gold and local price of gold. This framework curtails side marketing and gold leakages while at the same time promoting delivery of gold to FPR.”
The federation recommends a ratio framework as is the case for large scale producers as it enables scientific tracking of mineral prices. Also proposed the fair compensation of any surrendered portion in line with market developments in order to converge the world and local price of gold to minimize side marketing and gold leakages and full compensation in US dollars in line with prevailing world gold price.
“As ZMF we will continue to push for sectorial changes amongst them formalization, mechanization and above all remuneration which commensurate with the global prices of the minerals produced,” she added.