Financing the mining industry after Covid-19
Fidelity Printers and Refiners (FPR) predicts that in the post-COVID-19 period the mining industry will have a strong appetite for short to long-term financing to capacitate operations.
Benard Rinomhota
Before the outbreak of the Covid-19 pandemic which was first detected in China last December before it spread across all the continents, the local mining industry required US$1 billion to revitalise operations.
Speaking during the 2020 Mine Entra virtual meeting weeks back, FPR head of the Gold Development Initiative Fund Mr. Matthew Chidavaenzi said the pandemic has brought adverse economic shocks reducing accessing to markets leading to loss of revenue.
“In the post-COVID-19, there is going to be a significant push for short to long term finance to bridge cash flows, support expansion projects, add production and restructure balance sheets,” he said.
However, Mr. Chidavaenzi said the country has limited access to internal capacity to support the mining industry working capital and thus it was critical to have a stimulus funding.
Unanimously, he said it was also imperative for the country to attract offshore capital.
“It’s also important to realise that the global markets have taken a huge knock due to the pandemic.
“Obviously, our hope lies in the fact that our gold has remained one of the hedging asset class of choice for most investors, hence we expect demand to continue outstripping supply,” said Mr. Chidavaenzi.
Prior to the outbreak of Covid-19, the country’s local mining industry required about US$1 billion to re-equip, finance expansion plans, and operations.
“We also speak about US$250 million for the next three years but what has Covid-19 done, it brought adverse economic shocks and the general scaling down and mothballing of operations,” he said.
The other challenge likely to continue facing the mining industry after the pandemic, Mr. Chidavaenzi said would be power constraints.
Before the advent of Covid-19, power supply in Zimbabwe has generally been erratic and unreliable due to generation constraints by the country’s power utility Zesa.
“In the post-COVID-19 period, we expect a gradual increase in industrial activity leading to demand for power outstripping supply, and we are likely to return to power outages which will have a negative impact on the mining industry,” said Mr. Chidavaenzi.
Zimbabwe’s electricity generation constraints have largely been engendered by a lack of investment in new power projects.
Against this background, the government through the Zimbabwe Energy Regulatory Authority has since 2010 licensed over 70 independent power producers to set up electricity generation projects.
However, the country continues to experience power supply challenges as the power projects are at different stages of implementation.
In addition to the IPPs projects, the government has also been expanding and rehabilitating the country’s existing power plants such as Hwange Thermal Power Station and Kariba Hydropower plant.
Currently, Zimbabwe’s demand for power hovers around 2000MW but due to the ageing of the power generation plant equipment, the country is producing far below the national requirement.
This article first appeared in the August 2020 issue of the Mining Zimbabwe Magazine