Mining firms feel the pinch of coronavirus

Source: Mining firms feel the pinch of coronavirus | Sunday Mail (Top Stories)

Chief Reporter

Mining companies expect to take a US$400 million hit from April to June this year owing to the current Covid-19-induced lockdown in international markets, and are now lobbying Government to scrap income taxes and cut duty on critical raw materials, among other relief measures.

The mining sector, which generated more than US$4,9 billion last year, remains the lifeblood of the local economy.

However, the recent coronavirus outbreak has caused major disruptions to global trade.

The Chamber of Mines of Zimbabwe (CoMZ) believes the country is vulnerable to international shocks as “it has strong linkages to regional and global markets for the supply of mineral commodities and products as well for sourcing of inputs, equipment and machinery.”

But most local mining houses have been forced to scale down and put operations under care and maintenance as a result of lockdowns in both “transit” and “buyer” countries.

South Africa is presently under a 21-day lockdown, while China, the world’s biggest consumer of commodities, is now gradually lifting restrictions.

“The combined effect of reduced access to markets for commodities and inputs have resulted in loss of revenue with most mines now failing to meet fixed costs including payroll costs,” said CoMZ in a recent statement.

“Meanwhile, it is estimated that mineral production for the second quarter of 2020 may decline by about 60 percent compared to the first quarter, with revenue losses exceeding US$400 million.

“The revenue loss for the first 30 days arising from a total lockdown exceeds US$200 million, with estimated loss for gold and platinum of about US$160 million.”

Ferrochrome miners have haemorrhaged the most as prices for the commodity have dropped to “shutdown levels”.

Most smelters have been affected as a result.

Zimasco was recently put under care and maintenance, which Afrochine is operating 50 percent below installed capacity.

CoMZ now wants Government to waive payroll tax for the second quarter and to be allowed to pay taxes, electricity and utilities in local currency in order to allow them to use the foreign currency they have to stay in business.

They also want electricity tariffs for ferrochrome miners to be slashed in order to cushion them.

A royalty holiday, especially for the second quarter, is also likely to provide the much-needed succour, CoMZ adds.

“Safety has become a major concern for the mining industry specifically during this phase of Covid-19. In order to guarantee adequate PPE (personal protection equipment) and safety in the mining sector, we are appealing to Government to suspend customs duties and related taxes on PPE and allow efficient logistical movement of these essential requirements,” the mining chamber said.

Mines and Mining Development Minister Winston Chitando could not comment as his mobile phone was not being answered.