Zimbabwe's Gold Mines On Verge Of Collapse Due To Low Bullion Prices

Tyler Durden's picture

To say that Zimbabwe has not had much luck in its recent, post Robert Mugabe-goes-berserk, history with fiat money is putting it lightly.

But did you know that with gold trading at prevailing depressed prices, driven over the past several years not by physical demand but by paper supply, Zimbabwe is about to have another "money" moment, only this time not with fiat but with real money.

The reason: the same one why every so often we show the gold cost curve: because some miners simply can not continue operating if the "market" price of gold, with or without central bank and BIS intervention, is below their blended cost.

And while not shown explicitly on the chart above, unfortunately for the south African country, the cost curve of the entire Zimbabwe gold mining industry is on the wrong side of the gold price line.

According to Reuters, Zimbabwe's gold mining firms are suffering huge losses due to low gold prices "and could collapse unless the government reduces royalties for producers, the Chamber of Mines said."

The problem for Zimbabwe is that after relying too much on paper printing, it is now all too reliant on gold mining: gold is the single largest export earner in the southern African country, whose economy is flatlining as a result of lack of investment, electricity shortages and high cost of capital. Losing the mining sector would likely result in another major economic and financial crisis, although the local population is quite used to these by now.

So while gold trades based entirely on where the Bank of International Settlements decides any given morning where it should close that day, physical gold production is about to lose a major source, something which in a normal world would result in a huge surge in the price and, as a reminder, is the entire premise behind Saudi Arabia's strategy to crush the US shale industry:

More from Reuters:

In a report issued in December the mining chamber said that mines were making losses of up to $100 an ounce due to weak gold prices and high electricity charges.

 

Mines are charged higher electricity tariffs to ensure continuous supplies but this is not always the case in a country that produces 1,200 MW against a peak demand of 2,200 MW.

 

In the report by the mining chamber seen by Reuters on Tuesday, the group said lower power tariffs and uninterrupted supplies would save gold mines up to $55 an ounce.

 

"The above measures would have ensured the gold mining companies operate on a cash break-even basis and avert gold industry from collapse," the chamber said.

 

Chinamasa said in November the mining sector, which brings in more than half of Zimbabwe's export earnings, shrank for the first time in five years in 2014 due to low metal prices.

 

The government has set an ambitious target of 28 tonnes of gold in the next five years, to match a record set in 1990. Chinamasa has forecast that gold output could rise to 16 tonnes this year from 14 tonnes in 2014.

 

"If no immediate measures are taken, the likelihood of production reaching 1990 levels is very slim and in the extreme mines will go under care and maintenance to preserve assets," the mining chamber said.

And even though none of this is surprising, we certainly can't wait to see the price of gold to plummet once the news that one of Africa's largest producers of the yellow metal turns the lights of its gold miners out. Because when it comes to that metal most hated by central planners and bankers everywhere, the laws of supply and demand have long since become inverted.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
hedgeless_horseman's picture

 

 

Here is a good read about Zimbabwe, formerly Rhodesia.

Norman is convinced that food is the country's greatest asset and that as the primary producer of this asset, the commercial farmer must be retained on the land and encouraged to expand his production. "Hungry men become desperate men and more governments in Africa have been toppled by desperate men, hungry and jobless, than for any other reason."

kaiserhoff's picture

Rhodesia was called the Switzerland of Africa.

Wonder what changed;)

Bay of Pigs's picture

It was also called the "bread basket of Africa" at one time.

hedgeless_horseman's picture

 

 

It was also called the "bread basket of Africa" at one time.

Agricultural policy: A strong negative trend in the national maize production, which accounts for the major part of food production, over the last 15 years is evident (see Figure 1). A more recent (since 2000) decline is partly due to the structural change precipitated by land tenure changes and partly due to the overriding economic deterioration and reduced profitability of maize production. The newly settled farmers cultivate only about 30 to 55 percent (CFSAM 2007) of the total arable land allocated to them owing to shortages of tractor/draught power, fuel, and investment in infrastructure/improvements and absenteeism on the part of some new settler beneficiaries.  

http://www.fao.org/docrep/010/ai469e/ai469e00.htm

 

Maybe Zimbabwe's Gold Mines are On Verge Of Collapse not Due To Low Bullion Prices, but instead due to, "absenteeism on the part of some new settler beneficiaries?"

pods's picture

Have you ever used the term "that place is a gold mine?"

Seems that Zim's can even fuck that up.  

pods

hedgeless_horseman's picture

 

 

Detroit was indeed once a beautiful, wealthy, and prosperous city. 

hedgeless_horseman's picture

 

 

That is not a Motown Recording.

BaBaBouy's picture

TIME For USA To Print $1 Trillion Notes!
That Will Fix Everything.
They Want Keynesian Fiats, Then Lets Fucking Get Going With It...

Herd Redirection Committee's picture

Yes, yes, racist, I know, but their problems started when they started killing white farmers.

Period.  Bottomline.  End of story. 

rivoniaboy's picture

Here at Zero Hedge we can handle the truth.

Save_America1st's picture

I'm pretty sure the Zim are dead on in the cross hairs of China given its gold and agriculture capacity and potential

 

The Zim better be gettin' ready to learn some Chinese.

 

Oooooh, which also makes Zim a great war opportunity for the MIC, so keep an eye on it for some false flag action from Langley.

 

 

 

 

daveO's picture

Already proposed by the Jewish overlords in New York City.

http://www.nytimes.com/2013/01/11/opinion/krugman-coins-against-crazies....

It basically says, "If you won't agree to counterfeiting, we'll do it anyway!"

noben's picture
noben (not verified) Bay of Pigs Jan 28, 2015 3:21 PM

Some love the smell of Napalm in the morning, others...

Love the smell of hostile (corporate) takeovers. Nothing like a real of manufactured crisis to pave the way for buying up vital mineral and agricultural resources on the cheap, cheap, cheap.

BTW, didn't the 'Arbusto' family buy up their "Southfork" ranch (near Crawford TX) from some guy who suddenly became desperate to sell? Or Southfork II in Paraguay? Research it, peeps.

TuPhat's picture

The UK pulled out and their government became extremely crrupt.  Crime went rampant and other misfortunes followed.

hedgeless_horseman's picture

 

 

...their government became extremely crrupt.

Became extremely corrupt? 

Robert Mugabe?

So, before he was just very corrupt?

lol

NoTTD's picture

Since independence in 1980, Mugabe has been the only ruler in place.   His party, ZANU-PF, evolved directly from the rebel forces fighting colonial rule.    ZANU believes that it, and only it, can be allowed to govern.

 

So, it's not like there was some slightly less corrupt group in charge since Zim became a nation.  It has always been the exact same people/group.   

Monty Burns's picture

Blacks can't run anything.  Think of the trillions of dollars that would have been saved in foreign aid and in attempts for 50 years to 'bridge the educational achievement gap' if this simple demonstrable fact would only be accepted.

Aaronson.Jones.Rutherford's picture

Things seemed to be going just fine for the natives of Africa, the Americas, Australasia & India before the Europeans decided to colonise them.

RadioactiveRant's picture

They were doing much the same as they are now, only with spears. The corrupt tribal leaders, disease and belief in fairytales all predate European expansion.

daveO's picture

Yes, of course. They had no complex society or infrastructure to worry about. It only looks bad from our perspective because we like living beyond the grass hut. If their new colonizers (Chinese) have any sense, they'll treat them the same way the white man treated the Indians, in North America, and the Aborigines, in Australia. 

HungryPorkChop's picture

1 oz gold is currently worth $464,646 Zimbabwe Dollars.  3 oz of gold and you're a millionaire.  How in the world could they be going broke? <sarc>

http://www.goldpricerate.com/english/gold-price-in-zimbabwe.php

Latina Lover's picture

Time to print 100 QUADRILLION  notes.

darteaus's picture

It's always comforting but sad to hear someone advance a reasonable argument as to how a hate filled mob will act.

Good luck with that!

ParkAveFlasher's picture

That ZIM bank note would make a DOPE album cover. 

Canadian Dirtlump's picture

Get me a felt version and I'll color it and put it on the wall beside the bat out of hell one I did as a kid which I got from Sam the Record Man.

 

EIther way, these mines just need to sell to banksters for pennies on the dollar so the prices can recover. DEEP RESERVES FTW.

JailBank's picture

A trillion here and a trillion there, pretty soon we are talking about real money.

Hitlery_4_Dictator's picture

They need to abandon those and start prospecting for dollar mines...

cro_maat's picture

I am sure if they ask nicely (and hand over all of their gold) the FED will send them a printing machine (I hear Langley has one).

CrimsonAvenger's picture

I wonder if they have lots of oil, but have decided not to tell anyone? You know, because if we found out, we'd bomb the shit out of them to liberate them?

monkeyshine's picture

They just have to add another zero to their currency.

serotonindumptruck's picture

Exponential notation would seem more efficient.

No need to spell out "quadrillion" or "quintillion", etc.

Al Huxley's picture

I find that I just can't overstate how much I dislike the parasitic global banking elite and the destructive path they're cutting through the world as they vacuum up everybody's wealth.

kaiserhoff's picture

The Zimbabew Finance Minister just emailed me a great offer.

If I will just wire them $5,000 US to some Swiss account, they can "by petro we needs, mon, and you gets..."

darteaus's picture

FINALLY! The Zims and the Nigerians doing joint promotions!

RaceToTheBottom's picture

Nigerians are genetically predisposed to having skills in the "marketing area".  Or is it raycist to say things about genes?

Anasteus's picture

One of the side-effects of the low price I see, is to make foreign gold mines desperate enough and more vulnerable to hand over their mines to the parasites at ridiculously low prices; exploition unleashed. To avoid this, China and Russia should start buying up all the production at slightly higher and fairer prices to keep the business up and running, thus more resistant to sell-it-all pressure.

Monty Burns's picture

Already happened in Russia during the Great Harvard Hoover-up, featuring Larry 'Looter' Summers and his tribal sidekicks.

noben's picture
noben (not verified) Al Huxley Jan 28, 2015 3:14 PM

Sometimes "Buy Low" means more than being passively opportunistic or being a corporate raider.

At the national level of CBs, it means cratering entire nations and their economies, until the basics of life run out (TP, soap, food), and the ultimate "buy low" conditions are created that globalist moneychangers prefer: "Blood in the streets." The globalist money changers love Debt of all kinds -- be it for 'guns or butter': be it MIC type or Welfare type... Debt is Debt. Be it Casino Capitalism, or rampant Socialism. Debt is debt, and the Oligarchs in any debt-ridden or unbalanced country win in either scenario.

You're with them or against them. You're either in their Club*, or you're not.

* Sorry George, it's not a "big club". You misspoke. It's a Small Club. A very Small and Elite Club. And "we" ("We The Sheeple" and bloggers on ZH) ain't in it. The Big Club that we're in, is neither truly wealthy, nor elite -- given that it's a Zero Sum game of asset, wealth and political ownership.

August's picture

Only two rules, then:

1) Buy when there's blood in the streets.

2) Make sure that there is blood in the streets.

El Vaquero's picture

Always kick a man when he is down.  You don't have to lift your leg as far.

sessinpo's picture

Never kick a man that is down because one day the positions might be changed. If you are going to get dirty, you might as well go all the say and kill the bastard.

Kicking a man while he is down isn't much different then a one legged man entering an ass kicking contest.

darteaus's picture

A one legged man in an ass kicking contest can only win when he is lying down - by kicking his own ass!

TuPhat's picture

But, doesn't Yellen have both legs?

El Vaquero's picture

Psst, that was a bit of gallows humor.  Zimbabawe is already down because of its prolific printing, and now it is going to get its source of real money shut down. It's getting kicked.

 

And if you want to be realistic, if you are in a situation where you need to put somebody down, you keep on kicking until they are going to stay down.

Bay of Pigs's picture

What a sad state of affairs this world is in when gold and silver are hated and seen as enemies of the central planners and banksters. 

May they all rot in hell...