- October 18, 2019
- Posted in LOCAL
On Monday, Zimbabwe unveiled a strategic roadmap to propel the country’s mining sector to US$12 billion industry by 2023. Already, the mining sector is the largest foreign currency earner, accounting for 70 percent of export receipts.
The mining sector remains one of the key industries expected to anchor the revival of an economy suffering from depressed productivity and foreign currency shortages among others.
Under the US$12 billion mining roadmap, gold is expected to contribute US$4 billion, platinum US$3 billion while chrome, iron, steel diamonds and coal will contribute US$1 billion.
Lithium is expected to contribute US$500 million while other minerals will contribute US$1,5 billion.
Already, a number of new mining projects are at various stages of implementation while expansion of existing operations is underway.
Given the abundant mineral resource in the country,untapped or under tapped, mining holds huge potential of transforming the country to an upper middle class, in line with country’s Vision 2030. In launching the roadmap, President Mnangagwa warned of humps along the journey towards attaining the US$12 billion target, but said collective effort, determination and commitment, will see the “Zimbabwe we all want” being built.
Acting on power and transport
The Ministry of Energy and Power Development suggests that as much as 2 000MW are needed in next three years to ensure adequate power supplies to the nation. The total investment needed would be around $3 billion. While there are various projects in the pipeline, including some being promoted by mining houses, there is need for additional substantial investment into the energy since the $12 billion target would also largely depend on the availability of electricity. Rail and road networks need capital funding as well as cargo loading and offloading capacities. The investments will also require adequate working capital. This calls for a solid business proposition.
Currently, there is no effective mineral exploration policy, which should be attached to Mineral Development Policy. The Government says the exploration policy will come out soon.
The mineral exploration policy would allow funds to flow into exploration with adequate incentives to create an immediate junior miners sector. The targeted production volumes will make the targets more realistic if based on bankable mineral resource figures generated by mineral resource accounting firms. This is perhaps the most critical variable of all.
Redesigning of small-scale sector
Small-scale miners are a major contributor to production volumes and this largely refers to gold and chrome. As with small-scale gold miners, these have been the major contributors to production but they are involved in exploitation of shallow oxide deposits. Experts believe output would soon decline on increasing depths, low recoveries, hand got systems and depleting deposits. As such, there is need to redesign the small-scale mining strategy. There is need to define sector, regulate it and provide adequate support.
CBM or Methane
Zimbabwe is currently still in the initial production testing of coal bed methane. There is a lot of work that needs to be done both technically and commercially. Besides, the country still needs to craft a Gas Policy to regulate the new sector. Realising the set targets might be too ambitious though work can be speeded up, Shanghai Energy Exploration, the company that intends to extract methane gas and build a power plant said recently that from the preliminary works, there is evidence of the existence of a considerable methane whose now need to be proved.
There is a suggestion that coal production volumes will increase, but no explanation as to where the growth market is outside ZESA’s Stage 3 project. Prices of coal on the international market are strongly regulated and same goes for user markets. Industry players say thermal coal is around US$40 per tonne.
Zimbabwe produces at around US$20 per tonne. Transport to port costs US$60 per tonne making it US$80. If port and sea freight charges are factored, clearly, this becomes a challenge. Technically not enough studies have been done to see which steel plants abroad can use local, thus mentioning of exports of coking coal might be misplaced. South Africa Mittal can use a bit but blending constraints will limit volumes.
Chrome sector is a cyclic and generally very risky industry affected by global market trends around steel industry. Steel production tends to move up and down in volume and price and chrome is dependent on steel so its market tends to be unstable and price sensitive.
Besides, the sector is heavily dependent on competitive electricity tariffs.
The current tariff and United States/China trade war are threatening the sector. About 40 percent of chromium smelting cost is electricity so an unduly high electricity tariff kills this sector. However, while the sector faces a myriad of threats, if it can get a power tariff of around US4c per unit, considerable growth can be achieved but not at nearly US7c as current.
New projects such as Karo will need lead time to place orders, get capital equipment delivered and then construct. This takes an average of three years. The same goes for diamonds where it may take long to move up the growth value curve seeing that not much has been done on exploration.
Karo is, however, optimistic that by 2023, it will be producing at least 1,4 million ounces of platinum group metals and would have finished setting up a 300MW solar plant and a base metals refinery that will allow it to export directly from Zimbabwe.
A salient point is skills and competences as well as a vibrant industry to support this whole effort. This is critical. According to studies, Zimbabwe does not possess sufficient knowledge to propel the economy to the required levels.
It has been noted that the pervasive skills and knowledge gaps foster an operative level inadequate to take the industry to expected higher levels of job creation, valued added goods, and stimulation of economy through linkages, driving growth and exports and higher tax revenue among others.
The research also noted the existence of capacity challenges, which it said are apparent throughout the industry, but with training institutions most severely affected.
It was also noted that the skills levels of critical support institutions and stakeholders of the mining industry are still below the levels expected to deliver what the Government is expecting_Business Weekly