Zimbabwe miners dig deeper for solutions

Source: Zimbabwe miners dig deeper for solutions – Mineweb November 24, 2016

Gold, platinum and nickel are sparkling for Zimbabwe but coal, diamonds and chrome are down. But that is not the only good and bad news from the mineral-rich but struggling southern African country, with miners hopeful that the government will speedily address fiscal and policy issues weighing down the sector. 

Investors are weighing up the introduction of local bond notes at the end of this month, with a liquidity crunch forcing miners into arrears in terms of foreign payments, this according to the Chamber of Mines of Zimbabwe. 

According to the Chamber, the mining industry requires about 50% of earnings to pay for supplies and obligations to the government and shareholders. As much as $1 billion is required for such payments annually. 

“We are still seeing foreign payments challenges when miners have to pay for raw materials and the gold sector has been affected the most,” Isaac Kwesu, chief executive officer of the chamber of mines said on Wednesday. 

The problem has been felt across the economy, with the Confederation of Zimbabwe Industries also flagging this in its manufacturing sector survey released this week. The Reserve Bank of Zimbabwe however, prioritises exporters to retain half of their earnings although the recent worsening of the cash crunch has meant delays. 

The major miners in Zimbabwe include units of Asa Resources, Anglo Platinum, Sibanye Gold and Impala Platinum. Other local and international miners active in Zimbabwe are RioZim, Caledonia Mining Corporation and Falgold among others. 

There are “systematic challenges that are afflicting the industry” and Kwesu pointed to high-cost structures, funding constraints, as well as high fiscal charges. “We have high mining fees that the industry cannot afford,” he said. 

However, Zimbabwe’s Deputy Mines Minister, Fred Moyo, says the miners also have internal issues that they have to sort out. He however said the government was always responding to pressing issues the industry was facing.  

“There are a lot of structural issues that need to be sorted on the part of the miners because we always want to look at what the miners can also address on their own. There are issues such as mine design systems that need to be changed in line with developments elsewhere,” Moyo told Mineweb on Wednesday. 

Although gold, platinum and nickel producers have been facing mounting challenges in Zimbabwe, the producers in these categories registered significant growth in the nine month period to the end of September. 

Bullion production for the period rose 13% to 16.2 tonnes, with the country targeting output of more than 20 tonnes for the full year to December. Platinum increased from 9 tonnes in 2015 to 10.8 tonnes for the period under review while nickel also significantly rose to 13 tonnes. 

In terms of revenue, Zimplats, Mimosa and Unki managed to raise income from platinum sales by 4% to $300 million. Gold revenues, dominated by Freda Rebecca, Blanket Gold mine, RioZim and artisanal miners as well as other medium sized operations, propped up from $532 million in the 2015 nine month period to $648 million for the 2016 comparative period. 

Zimbabwe’s overal earnings of $1.38 billion from sales of the minerals that it produces were nearly flat for the period, with gold accounting for about 47% of this. Revenue potential was suppressed by poor performance from diamonds (income down 43% at $72.8 million) and chrome which saw a 39% decrease in revenues to $9.5 million. 

Although revenue from coal was up 6% to $66 million, production of the energy commodity was down 36% at 1.9 million tonnes. Kwesu said operating challenges faced by Zimasco and equipment as well as capital constraints encountered by Hwange were mainly to blame for the suppressed performance in the coal and chrome categories. 

Controversy has dogged Zimbabwe’s diamond industry in the past few years and the standoff between gem miners in Chiadzwa and the government earlier this year muzzled gem output. Zimbabwe has moved to form a consolidated diamond mining company incorporating all diamond miners in the country and the state will own half the shares of the corporation. 

The government has asked mining companies in Zimbabwe such as Zimplats and chrome producers to give up excess land for it to be given to new investors. Kwesu said the industry was yet to see the short term impact of this on investment and operations. 

However, Moyo said the government was sticking to this policy, saying : “If we are taking ground to empower others then it is fair” and highlighted that the excess land would be given to new investors. Zimplats is locked in a battle with the government in the Administrative Court in Harare where Zimplats is contesting this.