Open Forum Eddie Cross
I NEVER fully appreciated that Africa had the great majority of the gold bearing geology in the world. This became a reality when the gold reef was discovered on the Rand in the late 19th century. This quickly established South Africa as the largest producer of gold in the world with output exceeding 600 tonnes a year. The modern economy of South Africa was very largely founded and funded by gold.
In this country (Zimbabwe), Rhodes missed out on the early South African discovery and, convinced that the South African system extended into this country, he came here in the late 1900’s with a top geologist from the USA. The two of them toured what became Rhodesia in an ox drawn wagon. Eventually they ended up in Bulawayo where they camped, and Rhodes asked him to give him his opinion on the possibilities. The geologist said that although the country had lots of gold bearing geological formations, none of it resembled the South African system.
Instead, he told Rhodes that the real wealth in South Africa lay in deep mining to reach the reef which sloped down from the Witswatersrand. Rhodes woke up his secretary and sent him on horseback to Kimberly to send his London Brokers a telegram. He sold his holdings at the original discovery site and used the money raised to buy properties out in the open veld. This became the richest gold operation in history and founded the gold interests of Angol American – the Rhodes corporate vehicle.
Back in Rhodesia, a small group of companies started to explore the opportunities. In some cases extremely rich deposits were found and fortunes made, but they were few and far between. Many of those early mines still operate and are at depths below 1 to 2 kilometers underground. But we never really became a big producer.
Then in the period 2000 to 2008, when Zimbabwe virtually became a failed State and up to 500 000 people a year were fleeing to greener pastures, some communities discovered what Rhodes had identified over a 100 years ago; the Greenstone Belts which cover a third of the country, all had low grade gold content, much of it on the surface. Today people do not send their older children to work in South Africa, they send them to mine gold. At the Chamber of Mines AGM yesterday the Chairlady of the small scale miners Federation stated that over 2 million people were now actively involved in small scale informal mining. She stated that she had started at 5 grams a week and now mined 5 000 grams a month worth nearly three quarters of a million dollars.
I went out to Kadoma some time ago to visit a milling company that was processing the ore of the small scale miners in the area. I found a couple of young white Zimbabweans operating a 3 stamp mill, collecting the ore produced by about 75 small scale miners in the area. After milling, the free gold was collected in a cyclone and the remaining crushed ore went into a slimes dump where they operated a chemical plant to recover what gold was left over from the earlier stage.
The miners sat on the edge of the operation while their ore was being processed – about 5 tonnes per team and held the keys to the lock on the cyclone. When their run was complete, they unlocked the cyclone and collected their gold concentrate. They took this to a chemist on site where it was assayed and valued and they were paid in US dollars in cash. The two operators told me they deducted from the payment their fee for collecting the ore by tractor or truck and the cost of the milling process. The recovery of gold from the slimes dump was where the real money was found.
On average 5 people were involved in each of the 75 mines feeding the mill. That is about 375 to 400 individuals, if the average yield was about 2 to 4 grams per tonne. The slimes dump operation might yield another 1 to 2 grams – let’s assume 4 grams per tonne or 20 grams a week. Current gold prices are about US$150 per gram and so the output would be worth about US$3 000. If we assume the Federations estimate of the numbers involved, then this would reach over 250 tonnes a year. The value would be over US$35 billion. Clearly this is not being achieved but it still suggests that Zimbabwe has become a major gold producer.
Supporting this are two facts that are known; the Dubai Gold market handles nearly 500 tonnes a year from Africa without certificates of origin. Smuggled gold. The 6 refineries in South Africa all report substantial deliveries from Zimbabwe via informal routes. In addition, the great majority of the 150 000 Chinese nationals that live and work here are involved in the gold sector.
They have mechanized small scale surface mining and river bed mining as well as some major open cast mining operations.
The great majority of the milling operations that service the small scale sector are Chinese owned and operated. There are no records of Chinese output.
The larger, formal sector gold mines, most owned and operated by African or Western financial interests operate properly, sell their gold via the registered gold dealers in the country where it is refined and sold in the open market. Their gold production this year is forecast to be about 50 tonnes. Even at this level they are responsible for the majority of exports.
They also make substantial contribution to the fiscus and employment. Some are world class.
At the Chambers AGM was the CEO of the Ghana Chamber of Mines. He told me that Ghana had a similar problem to Zimbabwe – very substantial informal small scale mining and a substantial Chinese community that was engaged in the industry, as miners and processors.
He said that a statement to their Minister of Mines in Dubai that Ghana was a major contributor to the Dubai Gold Market, had triggered a study by the Chamber to establish the size of the sector and how it might be regularised. Steps already taken by the Government had substantially raised the formal output of the industry with the result that Ghana was now recognized as the largest producer of the metal in Africa.
If the Federations estimate of 2 million players in the informal gold industry is right, then there can be little doubt that our industry is several times larger that is currently estimated.
*Cross is an economist and a former member of the Reserve Bank of Zimbabwe’s monetary policy committee