Zim’s mining policy must now ensure growth

via Zim’s mining policy must now ensure growth – The Zimbabwe Independent from Miningweekly.com September 20, 2013

Zimbabwe’s mining industry is at a critical juncture, where it needs to put long-term plans to yield high returns on investment and raise the necessary funds to achieve such plans.

Botswana-listed investment banking group Imara Asset Management fund manager for the Imara African Resources Fund Bruce Williamson says such plans will be achieved only if the Zimbabwe government provides a clear and consistent tax regime and an investor-friendly mining policy, enabling companies to confidently plan for the future.

Taking Zimbabwe’s thriving mining industry in the early 1970s into account, during which the country ranked as the sixth-largest gold producer in the world, together with a thriving agriculture and tourism sector at that time, Williamson adds there is no country in Africa that is as favourably positioned as Zimbabwe to use its mineral resources and agricultural opportunities to grow a powerful economic base.

The type of future that lies in store for Zimbabwe’s mining industry will be determined in the coming months by the newly elected cabinet, he notes.

Williamson says, however, that the immediate effect of the election has been negative, as is evident in the sell-off on the stock market, with foreign investors having sold down almost 20% after the results were made public.

“Business and individuals seem to have reacted cautiously to the election results, making return on investments impossible to speculate on,” he said.

The once thriving mining industry in Zimbabwe, which continued to grow until the end of the 1990s – but never came close to realising its true potential – took a drastic turn for the worse at the beginning of the new millennium when the mining sector was affected by hyperinflation and the eventual demise of the Zimbabwean dollar towards the end of 2008.

Williamson highlights that post-2008, the industry rebounded strongly across a range of commodities such as gold, platinum-group metals (PGMs), chrome, ferrochrome, coal, copper, nickel, cobalt, iron-ore, phosphate and vermiculite, owing to higher commodity prices. Mining companies’ ingenuity and endeavour, with very little new funding was also key.

However, this growth has subsequently ground to a halt in the face of rising inflation, a serious shortage of power that led to ongoing power outages, a brain drain and uncertainty due to the Indigenisation and Economic Empowerment Act that was signed into law in 2008.

The Indigenisation and Economic Empowerment Act, which is aimed at transferring mineral wealth to indigenous Zimbabweans, requires all foreign mining companies operating in Zimbabwe that are valued at more than one dollar to sell a 51% stake to locals.

The election results and the indigenisation issue have resulted in global investors, who are spoilt for choice, staying well away from Zimbabwe, Williamson says.

Further, he believes that the lack of adequate funding post-2008 has caught up with most mines and that mine personnel are once again battle weary.

Zimbabwe has world-class PGM reserves and still attracted significant investments over the last 10 years amid the most challenging conditions, courtesy of platinum miner Impala Platinum (Implats) and its subsidiary Zimplats, world number-one platinum producer Anglo American Platinum (Amplats) and LSE-, ASX- and JSE-listed Aquarius Platinum.

Zimplats’ Ngezi mine operation, which comprises three underground mines and a concentrator, is 87%-owned by Implats and is situated on the Hartley Geological Complex, in the Zimbabwean Great Dyke, 150 km south-west of Harare.

The Zimplats Phase 2 project, which was initiated in 2010, entails the development of a new two-million-ton-a-year underground mine, an additionally sized concentrator and associated module, as well as other infrastructure.

In the 2012 financial year, the Ngezi operation produced 187 100 oz of matte platinum.

This project will not only add an additional 90 000 oz/y of platinum to the group’s yield but will also increase production at Zimplats to 270 000 oz/y of platinum when it reaches nameplate capacity, expected in the 2015 financial year.

Zimplats also owns the Selous metallurgical complex (SMC), which comprises a concentrator and a smelter, located about 77 km north of the mine, and the Hartley platinum mine, situated at the SMC, which is currently under care and maintenance.