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Bullion traded near $2,626 an ounce in thin trading after closing 1.1% higher on Friday.
Zambia, which last month became Africa’s first pandemic-era default, will begin buying gold from Canada’s First Quantum Minerals (TSX: FM) and a state-owned miner for the first time in 25 years, as it seeks to boost foreign-exchange reserves currently near record lows.
Under a gold-buying deal inked Friday between the country’s central bank and First Quantum, Zambia will acquire all the gold produced as a by-product of the company’s Kansanshi copper mine.
The operation generated 145,000 ounces of gold in 2019 and is expected to produce 220,000–235,000 tonnes of copper, and 120,000–130,000 ounces of gold this year.
The central bank will buy all the gold produced as a by-product of First Quantum’s Kansanshi copper mine
The bank also signed an agreement with the nation’s mining investment company, Zambia Gold, which buys bullion from small-scale producers and owns a small mine.
“During periods of market stress — when assets would be losing value — gold would be adding value, thereby shielding the whole portfolio from large losses,” Bank of Zambia Governor Christopher Mvunga said in the signing ceremony.
The deals fit into Zambia’s strategy of boosting revenue from its mineral resources, outlined earlier this year.
Before today, the last time the southern African nation touched its gold reserves was in 1995. Back then, it had to sell them in response to dollar shortages following decades of nationalization and declining copper prices. The economy was also straining under unsustainable external debt and inflation.
Gold was worth at the time less than $400 per ounce. The precious metal is currently trading at more than $1,830 an ounce.
Zambia’s mining assets have been in the spotlight as the country’s financial situation deteriorated this year and the pandemic prompted Glencore (LON: GLEN), one of the biggest miners operating in the country, to shut its Mopani Copper Mines (MCM).
The move angered the government, which threatened to revoke Mopani’s mining licenses and temporarily blocked its chief executive officer Nathan Bullock from leaving the country.
Glencore reacted by putting its 73.1% stake in the operation on the table, hoping to reach a deal with authorities.
Talks and undergoing and the Ministry of Mines has said it expects to table a deal for the Swiss company’s stake in Mopani Copper Mines before the end of the year.
– With files from Reuters and Bloomberg
