Opening gold refinery is sign of a real industrial revolution

IT is now official that Tanzania is set to start exporting fully refined gold in two months time upon completion of the first gold refinery plant now under construction in the inland capital, Dodoma.

There is a gold refining facility in big mines but refinement to close to 100 per cent is something new, as value addition to 70 per cent of refining requirements or up to 85 percent is still in technical terms the selling of an industrial raw material rather than the finished product.

Refining up to 99.9 percent as the new plant is expected to reach, makes the difference with 100 per cent refinement a technicality, virtually a question of idiom.

There are a number of monetary fallouts from the change, as Minerals Minister Doto Biteko said the government will move to establish a national gold reserve as called for in the Mining Act. Still it is clear that the government needs more of the revenue than piling up gold reserves, as in the final analysis there is no difference between hard currency and gold reserves.

It is just an extra saving for a rainy day, and that is why accent is placed on monetary royalties upon full refinement of gold, thus value addition.

A similar role is expected from the Bank of Tanzania which shall now be required to purchase and store gold, a position that the president expressed during the monumental intervention on exports of gold sand, etc. In that case the really interesting part is that the country starts being a gold producer rather than a raw gold producer – what is hidden in usual language about being Africa’s fourth biggest gold producer. Maintaining a gold reserve is also a step forward as cushion in managing the public debt, etc.

As this shift to refining gold locally is coming at a moment when the government is taking radical measures to ease conditions of doing business, it means that there is a considerable chance that the shift will not just be stage managed to suit policy prerogatives or directives but actually be embedded in the gold extraction industry.

All these changes have destabilized the local gold mining firm, Acacia as it was anchored in negative mining practices and faulty projections of revenue. Its main shareholder, Barrick Gold Ltd appears to be more understanding, and is repurchasing the third of total shares so that gold mining in Tanzania remains sustainable under the new regulations, without friction with state authorities.

Looking at the figures, the potential for building a significant gold reserve to act as an auxiliary pillar in the monetary balance is considerable, as the plant builders say the refinery will be able to process up to 30 kilograms per day at the start, and increase operational capacity to one tonne per day in a year’s time or less. Whether we already produce sufficient gold for the purpose is one thing but with artisanal mining sales also redirected to local sales centres instead of being exported, it would not be surprising that the capacity can be properly utilized.

There is also a refinery to be set up in the Lake Zone area, and definitely these investors did their homework to ascertain that there will be optimal productivity there. It thus follows that the country’s finances will be stable, but it isn’t a ticket for a borrowing spree