Reserve Bank of Zimbabwe subsidiary Fidelity Printers & Refiners has decided to encourage gold production in the country by paying an incentive price over and above contractual purchase prices.
Fidelity will pay a price of US$44,000 per kilogram, or $1,368.55 per ounce, which is arounds $86/oz, or 6.7%, above the current prevailing London Bullion Market Association (LBMA) spot price.
Caledonia Mining, which operates the Blanket mine in the country and sells bullion to Fidelity, is set to benefit, saying it is contractually entitled to receive a price derived from the afternoon price fixed by the LBMA the day after the bullion delivered has been assayed.
However, the company was unsure of the details of the incentivisation scheme.
“At this stage it is unclear how long the gold support price will remain in place, how, when and by what rationale it may be adjusted in the future and whether the additional income associated with the gold support price will be subject to Zimbabwean income tax or royalty deductions,” it said.
“Caledonia has made requests for clarity on these issues and will notify the market in due course if appropriate.”
This is not the first initiative launched by the country to promote mining. Last year the government upped its export credit incentive from 2.5% to 10% of revenues, which also benefitted Caledonia.
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