Caledonia Mining has requested clarity from Fidelity Printers & Refiners, in Zimbabwe, regarding a proposed new gold support price.
Caledonia currently sells its gold production, through its Blanket Mine subsidiary, to Fidelity and is contractually entitled to receive a price that is derived from the afternoon price fixed by the London Bullion Market Association (LBMA) the day after the bullion delivered has been assayed.
Fidelity recently announced that, to incentivise gold production in the country, it would pay an incentive price over and above the contractual purchase price. This incentive price would reportedly be $44 000/kg, or $1 368/oz – a premium of about $86/oz (6.7%) on the current prevailing LBMA spot price.
“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,” Caledonia said in a statement issued on Monday.