With Zimbabwe sitting on a lucrative mineral treasure trove and angling to attract foreign direct investment (FDI), Australian listed firm, Prospect Resources, is on course to spending an estimated US$55 million on a new lithium plant in the southern African country. Zimbabwe Independent business reporter Tinashe Kairiza (TK) spoke to Prospect Resources executive director Paul Chimbodza (PC, pictured) on how attractive Zimbabwe is as an investment destination and how the lithium plant will add impetus to government’s efforts to grow the economy. Below are the excerpts:
TK: You recently announced that you raised US$10 million through a share placement. How are you going to channel these resources towards operationalising the Arcadia Lithium plant?
PC: Proceeds of the placement will be used to accelerate the development of the Arcadia Mine, progress exploration at the Good Days Lithium Project (under option), investigate and possibly acquire additional projects focussing on lithium and cobalt projects, and supplement general working capital.
TK: Initially, it was reported that the total cost of setting up the Arcadia plant was US$55 million. How do you intend to generate the outstanding resources?
PC: The US$55 million is the capex for the procurement of the process plant and construction and this has already been secured under our conditional off take and placement agreement with our Chinese EPC and product offtaker, Sinomines
TK: Do you think the plant will become operational during the first quarter of the year?
PC: Project ground-breaking is expected in Q1 of 2018 and plant commissioning is only expected at least 14 months after commencement of construction. This is in line with the lead time required to construct the crushing, DMS (dense media separation) and flotation circuit.
TK: Once the plant starts running, how much do you think you will be able to recoup in the short term?
PC: The project is planned on a 36-month capex loan payback period.
TK: How important would the plant be towards government’s broader efforts to grow the economy?
PC: We are extremely excited about the project, the employment we will generate, the development we are bringing to the country and the prospect of further investments into battery-related minerals. Zimbabwe can be the centre of southern Africa’s battery mineral revolution.
Arcadia Lithium project brings along a whole new industry to the mining sector, it will create about 400 direct new jobs, 100% of our product is destined for the export market and new technologies and skills transfer will be brought into the country. In addition, we are receiving many requests from skilled workers from the diaspora wishing to return.
We are excited and proud to play our role in supporting the growth of the Zimbabwean economy.
TK: I understand that you also own gold assets in the country. What progress are you making towards exploiting the gold reserves?
PC: The gold assets are housed in a related sister company and are already and currently in production, with consented efforts by the technical team to delineate new resources for possible future ramping up of production. Our focus has however been on lithium for the past 18 months
TK: What are the production targets you have projected at the Arcadia plant, once it is up and running?
PC: We have signed a conditional 7-year offtake agreement that obligates us to supply 390 000 tonnes of Spodumene Concentrate (6% Li2O); and1 097 000 tonnes of Petalite Concentrate (4% Li2O) over the tenure period of the agreement.
TK: Zimbabwe is the largest lithium-producing country in Africa; would the Arcadia plant solidify that position?
PC: Arcadia Lithium Project is currently the largest JORC-compliant (Australian code) hard rock lithium deposit in Africa and 6th largest in the world and the successful exploitation of this deposit, along with other deposits being evaluated by other players, will definitely cement Zimbabwe’s position as one of the leading lithium producers in the world. This position hinges on the timeous capacity to bring the deposits into production so that we remain relevant in the global lithium supply dynamics that are underpinned by a very narrow window that producers need to ride on.
TK: What kind of support will government extend towards efforts to operationalise the project?
PC: We have and continue to receive tremendous support from government through various line departments, notably our parent Ministry of Mines and Mining Development, the Ministry of Finance through Reserve Bank of Zimbabwe, the Environmental Management Agency, Zimbabwe National Water Authority, Zimbabwe Electricity Supply Authority, our local farming communities and a host of other key stakeholders in the project.
Arcadia Lithium project has been accorded National Project Status, is a 100-day Rapid Results Approach project, has received an environmental impact assessment certificate, is licensed by the Zimbabwe Investment Authority (ZIA) and is currently being considered for Special Economic Zones status.
The directors and shareholders are humbled by the level of support we are getting from the Government of Zimbabwe, a message we wish to share with other prospective investors
TK: What is your perception about the security of your investment in Zimbabwe, particularly under the new dispensation?
His Excellency, Cde ED Mnangagwa, in his inauguration speech and in various other local and international forums, has repeatedly assured all local, foreign, current and aspiring investors that “Zimbabwe is open for business” and that all investments are secure. We are making sure that we support the Government of Zimbabwe’s efforts in buttressing the President’s call for “business unusual” and demonstrate to the world that Zimbabwe is the place to be. We see ourselves as the new ambassadors to the country’s mining investment call.
Along with our major Australian shareholder, Prospect Resources represented by our chairman Hugh Warner and executive director Harry Greaves, we will be showcasing the story of Zimbabwe as a safe investment destination for the mining and other sectors and we will be collaborating with the Ministry of Mines and the Mining Indaba at the forthcoming Cape Town Mining Indaba to sell the Zimbabwean story to our colleagues in the investing world.
We are so confident of Zimbabwe to the extent that we are on the prowl for other new opportunities in the mining sector. The time is now.
TK: Are there specific timelines as to when you intend to start exploiting your gold deposits? Have you conducted an exploration exercise yet to determine the exact size of the gold deposits you are sitting on?
PC: As alluded to in my earlier response, the gold mines are already in production and we are conducting further mine exploration to increase the resource. Determination of global resource size is work in progress with our geologists currently conducting resource definition drilling.
TK: In the short term, how much would be required to start mining the gold deposits?
PC: As above and we are funding this from inhouse resources generated from current production.
TK: Government recently announced that it has scrapped some of the provisions of the indigenisation law; do you think this is something that will attract foreign investors?
PC: Definitely without a doubt as the Indigenisation law, though had good intentions, was a sticking issue with any investor across all sectors of the economy, mining included. However, kindly not that our operations have strong local indigenous participation as our major shareholder, Prospect Resources, strongly believes in working with locals, who inherently value add to the projects.
Also, you may want to know that all our operations are manned 100% by local Zimbabwean experts and we do not have any foreign workers except when we bring in consultants on a need basis. Zimbabwe is well and adequately endowed with human capital to run commercial mining operations.
TK: Prospect Resources has invested quite a significant amount of capital in Zimbabwe, what message would you offer to other investors who have adopted a “wait and see approach” with regards to Zimbabwe as a safe and rewarding investment destination?
PC: Zimbabwean geology compares extremely favourably to any global geological address with more than 60 different mineral commodities having been commercially exploited historically and any geologist would find it very difficult to overlook Zimbabwe as it offers a competitive geological address to the discerning investor.
TK: You will be participating at the Cape Town Mining Indaba this week. What opportunities do you think that platform will present to Prospect Resources in its endeavour to quickly implement the Arcadia Lithium plant?
PC: We have pretty much ticked all the boxes in as far as financing and bringing Arcadia into production in the next 14 months and our message to fellow investors is to showcase what can typically be achievable in Zimbabwe in collaboration and support from the Government of Zimbabwe. We are at the Indaba as proof that, really, “Zimbabwe is open for business”.