The Bank of Zambia (BOZ) has only managed to purchase 479 Kgs (15,392 ounces) of gold at a cost of K604.3 million (about US$27 million) since December, 2020. But when checked against the three months import cover required, this amount is considered a moderate starting point with BOZ signaling its non-aggressive approach.
Accumulating reserves at this rate means that the central bank is accumulating gold reserves at an average of about US$4 million per month, which would take decades to accumulate enough reserves to cover say the recommended three months import cover for Zambia.
Gold reserves have been seen as a viable alternative to establishing a strong alternative to holding US dollar reserves that can be used to back the Kwacha and bring to an end, the historical years of perpetual Kwacha depreciation, which is one key economic variables that is responsible for loss of value for Kwacha asset holders who are mostly local Zambians.
BOZ stated that of the 478.76 Kgs, 391.92 Kgs was purchased from Kansanshi Copper Mine (a part of FQM) at a cost of K500.5 million while 86.84 Kgs from the Zambia Gold Company at a cost of K103.8 million.
The Zambia Gold Company was expected to shore up its production by now and contribute heavily to establishing a huge chest of gold reserves, but purchases by BOZ seems to be telling a different story. There is need for transparency in the operations of Zambia Gold Company in terms of availing monthly production figures and explanations on why its production seems to be below expectations.
According to information made available to the Zambian Business Times-ZBT, the Bank plans to purchase 746.5Kgs (24,000 ounces) of London Bullion Delivery gold from KCM and about 120Kg (3,858 ounces) of dore gold with a minimum of 88% purity from Zambia Gold Company per year.
“This is broken down in 391.92 Kgs (12,600 ounces) purchased from Kansanshi Copper Mining Plc at a cost of K500.5 million and 86.84 Kgs (2,791.91 ounces) purchased from Zambia Gold Company, a subsidiary of ZCCM – IH at a cost of K103.8 million,” BOZ stated.
The Central bank re-affirmed that the objective of this initiative is to shore up and diversify Zambia’s international reserves. The attractiveness of this venture is that the gold is being purchased in local currency.
The dore gold purchased from Zambia Gold Company will only reflect in international reserves after refining. The Central bank did not confirm how much or how long it would take to refine the dore gold.
The central bank purchased 65.32 Kgs of London good delivery gold from FQM in January, February, March, April, May, June 2021, while BOZ purchased 47.96 Kgs of dore gold in December 2020,21.83 Kgs in February 2021, and 17.05Kgs in March from Zambia Gold Company.
