Coal sector constraints can affect the whole mining value chain

Zimbabwe’s coal mining sector is facing serious challenges that can disrupt the whole mining value chain, the President of the Chamber of Mines Collin Chibafa has hinted.

Speaking at the 2022 edition Annual Mining Conference which is running under the theme ‘Consolidating Growth Drivers for the Mining Industry’ Chibafa said the coal industry is facing a myriad of problems that may lead to further power problems.

“As reported last year, Your Excellency, the growth potential of the coal sector continues to be faced by unique challenges of suboptimal pricing framework and foreign currency shortfalls being predominantly a non-exporting sector. While engagements with Authorities on the matter are still ongoing, we feel the issues largely remain unresolved, which may threaten the power supply situation of the country in the medium to long term,” Chibafa said.

Recently the Permanent Secretary for the Mines and Mining Development Onisimo Mazai Moyo acknowledged that the mining industry was affected by the fragile electricity supply that the government was working towards eradicating.

Chibafa also said that the Chamber of Mines was engaging Zimbabwe Electricity Supply Authority (ZESA) for it to prioritize mining companies for available power in order to maximize production.

“Mining companies, specifically those not connected to dedicated power lines continue to face power outages resulting in production and output losses. We continue to appeal for prioritisation of mining companies for available power,” Chibafa said.

The current foreign currency retention thresholds remain the elephant in the room which needs to be addressed according to Chibafa.

“A significant number of mines are facing foreign currency shortfalls to meet their operational requirements. With most mining companies in expansion mode, they now require more foreign currency than they are allocated. The additional foreign exchange requirements are needed to fund the capital projects including setting up beneficiation facilities. We believe retention levels of at least 80% are optimal for the mining industry, given the capital intensity of mining businesses. The Chamber of Mines will remain engaged with your government, Your Excellency, for a more optimal solution to foreign exchange management,” He said.

He also said that the mining industry has a huge funding gap to optimise its operations and meet targets. Most mining houses are struggling to raise offshore funding and are relying on internally generated resources (retained earnings). He also pointed out that most foreign investors are seeking clarification on Government’s position on Indigenisation in the mining sector to enable them to inject capital into the mining industry.

The Chamber of Mines President said the amendment of mining laws was very important for the growth and development of the mining sector.

“Your Excellency, on legislative and policy matters, we have been working closely with Government in addressing outstanding legislative and policy matters and we are hopeful that these matters will be finalised to unlock the full potential of our mining industry. The matters include Amendments to the Mines and Minerals Act. We note that the Amendments to the Mines and Minerals Act remain outstanding. We urge the government to expedite these amendments as some investors remain non-committal on investing pending the conclusion of this process. The upside associated with the introduction of new improved mining legislation is huge. Amendments to the Gold Trade Act: Gold remains a major mineral commodity for the country. We anxiously await the review of the Gold Trade Act with the hope that the chain of custody of gold from mine to market will be enhanced thereby removing the possibility of leakages. In addition, we look forward to an improved marketing framework for gold that will facilitate the raising of capital for gold projects,” he said.

The 2022 Annual Mining Conference was officially opened by President Emerson Dambudzo Mnangagwa pledged his support to see the growth of the mining sector.