Mining ZimbabweLatest Mining News, Policy and Industry Updates

ZIMBABWE is set to reap about US$30 million as capital gains tax from the sale of Arcadia lithium project by Prospect Resources to a Chinese resources outfit, Zhejiang Huayou Cobalt Co (Huayou).

On December 23, 2021, Prospect announced it had executed a binding agreement with Huayou for the sale of its 87% interest in the Arcadia lithium project for approximately US$378 million.

“The transaction is also expected to complete in late first quarter or early second quarter of 2022, the company still expending on corporate expenses, likely exploration, and new projects development up until then.”

“In summary, we estimate PSC (Prospect) will have approximately A$500m after deducting expenses and tax, and including cash prior to transaction announcement (ca A$23m) and from in-the-money options we expect to be mostly exercised (A$11m).”

Subject to and following completion of the sale, Prospect said it intended to retain a cash balance of up to US$50m (A$70m), with the balance intended to be distributed to shareholders.

Key conditions precedent includes Prospect shareholder approval, Chinese regulatory approvals for Huayou, Zimbabwe government approval, and termination of existing offtake.

Given the extensive due diligence undertaken, the competitive tension, and number of parties that submitted proposals during the partnering process, Prospect expected low risk of the transaction not completing.

“We understand that the Zimbabwean government is supportive of the transaction, especially with Huayou’s demonstrable mining experience in Africa and sizeable balance sheet. The other shareholders of Arcadia, who own 13%, have also agreed to sell their interest to Huayou,” it said.

This means Huayou would pay up to US$422 million to assume full control of the operation.

The broking firm said Huayou had paid a deposit of US$20m to Prospect, which is non-refundable in certain circumstances if the transaction does not complete, including Chinese regulatory approvals not obtained.

A standard no-shop, no-talk US$20m break-fee is payable by Prospect should the sale not be concluded in certain circumstances.

NewsDay

Zimbabwe’s mining industry wants to wholly pay royalties, taxes and other levies in local currency to improve the viability of the sector amid revelations they are struggling to find takers for the local currency.

Currently, the miners are paying half of their royalties in Zimbabwe dollars, a situation which has sparked a major headache for the sector.

“It is our hope that the exporters will be given the option to pay royalties and taxes100% in local currency to enable companies to have sufficient foreign currency to meet operational and expansion needs,” the Chamber of Mines of Zimbabwe CEO, Isaac Kwesu said.

The miners are also allowed to retain 60% of their export earnings and surrender 40% to the Reserve Bank of Zimbabwe at official exchange rate, a situation the miners said was piling viability pressures on the sector expected to spur the economy. Miners say they are losing about 20% of their export revenue through exchange losses.

Miners said the amount of foreign currency they retain is no longer enough to fund working capital and want an upward review of the retention threshold.

Government is hoping that the mining sector will help revive the economy.

President Emmerson Mnangagwa’s administration has set an ambitious target  to grow revenue from the sector  to US$12bn by the end of next year.

Kwesu said the Chamber will continue to push for the decrease of the surrender requirements to ramp up production and capitalise on firming commodity prices.

The mining companies are now allowed to participate on the forex auction system to cater for the shortfall needed to fund operations.

But since that permission has been granted miners are yet to access the forex from the auction system to cater for their requirements.

At the CZI outlook symposium for 2022 held last week, the  Chamber said miners are facing a plethora of challenges that include forex shortages and a volatile environment.

“Inadequate foreign exchange allocations (to fund operational requirements and expansion projects), loss of value on the surrender portion of export proceeds due to exchange rate disparities, capital shortages, erratic and inadequate power supply, high-cost structure and infrastructure bottlenecks are some of the major challenges that the sector continues  to face,” the Chamber said.

Miners’ engagements with the monetary authorities on the matter are ongoing but the Chamber said the RBZ governor John Mangudya still sticks with his Monetary Policy Statement stance.

But the need to fund the forex auction system has pushed the monetary authorities to increase the export surrender requirement to 40% from 30% and the move has left miners short of requirements.

RBZ said maintaining the exchange auction system remains paramount in anchoring inflation and ensuring price and financial system stability.

The apex bank said it will continue refining the foreign exchange auction system taking into account fundamentals as well as closely monitoring the utilisation of funds.

The RBZ’s bid to stabilise the auction system has negatively affected the mining sector as the capital for production will be used to sustain the market.

Zimbabwe is in a serious fix over how best the authorities can deal with forex backlog, stabilise the exchange rate and address the forex challenges.

In the past weeks, the industry players have been involved in a tussle with the RBZ over the haemorrhage of local currency.

“These are the issues we have been talking about over the past five years and they remain unresolved,” Kwesu said.

The capital intensive sector requires over US$3bn to increase production but the monetary authorities are reducing the funding by increasing the surrender requirements thereby affecting the miner’s production cycle due to lack of capital.

The sector generated a record US$5.2bn in export earnings (83% of aggregate exports), compared to US$3.2bn in 2020, on the back of firming commodity prices.

Many commodity prices rose sharply reaching all-time high levels between 2020 and 2021.

In the outlook for 2022, anticipated global economic recovery is expected to be accompanied by favourable commodity prices.

Business Times

Freestones Mine Private (Ltd), a Chinese mining company, has informed authorities at Civic Centre through a Notice of Cancellation, that it will not advance investment plans at Dangamvura mountain for quarrying activities.

In an unprecedented move, Freestones Mine wrote to council informing of its withdrawal from the five year lease agreement to mine for quarry – in a project which faced public condemnation, at a 6.5 hectare piece of land.

Acting Town Clerk, Blessing Chafesuka reported to the Business Investment and Economic Development Committee and head of departments that Freestone would not proceed with the lease pegged at a paltry fee of US7500 per annum.

The report state that the miner through Mushoriwa Pasi Corporate Attorneys had activated a withdrawal option in clause 10(a) of the controversial agreement, which had attracted the ire of environmental and residents groups.

“Freestones entered into a lease agreement with council on 30th of April 2021 after being awarded the tender to carry out quarry stone mining activities at stand number 13415 of Mutare Township, Mutare.

“Freestone mines took note of the resistance from different people and stakeholders who are totally against the project.

“Freestone Mines Pvt (Ltd) was awarded tender to carry out quarry mining operations for a period of five year. This followed an advert flighted o the 28th of August 2020 Daily News on Sunday, (and) on the 30th of August 2020,” reads part of the report.

Chafesuka informed the investment committee that in receipt of this notice for cancellation the municipality notified to all head of departments, council recommended the same.

Civic society organizations including the Centre for Natural Resource Governance (CNRG), United Mutare Residents and Ratepayers Trust (UMRRT) and other interest group had petitioned council and the Minister of Provincial Affairs Nokuthula Matsikenyeri to stop the deal.

Mhakwe Heritage Foundation Trust director David Mutambirwa said this reversal was justice for advocates of environment protection social justice and rights groups pressing for restoration of indegenous value to local heritage.

He said protection of indigenous heritage, species and natural capital is under threat from weak environmental regulations which they are advocating for improvement through ongoing consultations on the review of Environment Management Act.

“We recently submitted to the ministry of Environment our concerns regarding protection and preservation of biodiversity as well as the issue of urban mining activities given the recent quarry project agreed by council.

“Our submissions impress on the need to seek robust solutions that protect environmental rights, preserve our heritage as well as conserving biodiversity,” he said.

263Chat

The Zimbabwe Republic Police (ZRP) has reported a fatal mine accident that occurred at West Nicholson ‘B’ Mine.

The ZRP said on Monday, the victim aged 39 was crashed on the head by a boulder while chiselling the walls of an underground tunnel at West Nicholson ‘B’ Mine.

Reports of mine accidents in Zimbabwe has been on a decline due to the adoption of new mining technologies.

The accident came after another accident was reported at Blanket mine. Blanket has not recorded a fatal accident since 2017.

AIM-listed Premier African Minerals, which is developing the Zulu lithium and tantalum project in Insiza District, Matabeleland South province, has reported new intersections of lithium and tantalum.

According to the company, recent drilling activity on the southern part of the project area has shown new resource intersections including 21 metres grading 1,23 percent lithium oxide and 920 parts per million (ppm) rubidium from 37,1 metres; and 20,7 metres grading 1,44 percent lithium oxide and 4 138 ppm rubidium from 21,6m.

Group’s chief executive officer, Mr George Roach, expressed pleasure that drilling results for the project have started trickling in.

“I am pleased to see that drill results are now starting to come in, and particularly that these results announced today are from an area not included in our initial resource estimates,” he said in a latest public update.

“They do support our expectations of further discoveries and a probable increase in the mineral resource at Zulu. At the same time, considerable work is focused on refinement and upgrade of the resource. Further updates will follow,” he said.

“Our current objective is to secure direct trade investment into Zulu from a potential leading industry partner and while there is no certainty that a final investment agreement will be concluded, negotiations, together with legal, corporate, and technical due diligence continue.”

Last year, the diversified mining group made a placement of £1 million for the ongoing definitive feasibility study at the Zulu Lithium project.

The placement is intended to ensure there is no interruption to the work in progress at Zulu as well as allowing additional time to enhance value through the DFS and comprehensively and without any pressure, assess other options available to fund the balance of the DFS.

The lithium mine is one of the 25 projects that the Government, through general notice 328 of 2021, has granted Exclusive Prospecting Orders for a period of three years up to 2024.

Premier is focused on mining and developing natural resources in Southern Africa with its RHA Tungsten and Zulu Lithium projects in Zimbabwe.

The group has a diverse portfolio of projects, which include tungsten, rare earth elements, lithium and tantalum in Zimbabwe and lithium and gold in Mozambique, encompassing brownfield projects with near-term production potential to grass-roots exploration.

Premier also holds over five million shares in Circum Minerals Limited, the owners of the Danakil Potash Project in Ethiopia, which has the potential to be a world class asset.

In addition, the multi-commodity firm holds a 19 percent interest in MN Holdings Limited, the operator of the Otjozondu Manganese Mining Project in Namibia.

The Chronicle

HWANGE residents have urged mining companies in the town to invest in infrastructural development. In separate interviews, residents said the majority of social amenities were in need of rehabilitation.

“When I first joined the colliery in the 1970s, the town was lively. But nothing much has changed since then. We still have the Edmand Davis Hall, the tennis courts, the number two houses with only difference being that the houses have deteriorated,” said Mr Micah Smith, one of the residents who has seen better days of the Hwange Colliery areas.

Mr Malvin Daka of the Vostile Creations Trust said there was a need for legislation to force mining companies in the area to uplift communities.

“The mining Act needs to be amended. We are saying let’s tax the rich, meaning the investors, so that the money which is taxed can be used in the provision of social services such as the health sector,” said Mr Daka.

The setup of Hwange of dual administration where there is a concession residential area and another run by the Hwange local board has played a role in influencing inequality, he argues.

Hwange urban is run by four authorities namely Hwange Colliery Company, National Railways of Zimbabwe, Zimbabwe Power Company and Hwange Local Board.

“These are some of the reasons why the community of Hwange is saying let’s do away with dual administration, and have only one administration to provide for the residents equitably,” Mr Daka added.

Greater Hwange Residents Trust coordinator, Mr Fidelis Chima said the limited decision making power of the council was affecting service delivery.-Citizen Bulletin.

The Sunday News

INFORMAL mining in Zimbabwe is believed to be one of the biggest contributors to minerals being smuggled out of the country, and that is a cause for concern which should be addressed as a matter of urgency.

The predominant minerals include platinum, chrome, gold, coal, and diamonds. Informal mining which is largely characterised by artisanal and small-scale miners has seen Zimbabwe estimated to be losing at least US$100 million worth of gold every month from smuggling.

It is estimated that there are between 500 000 and 1,5 million artisanal and small-scale miners operating in Zimbabwe and of these only 16 percent are registered according to the Mines and Minerals Regulation Act Chapter 21;05. In an interview, Parliamentary Portfolio Committee on Mines and Mining Development chairman Hon
Edmond Mkaratigwa said the effects of informal mining from a Government perspective saw informal miners being difficult to regulate. He said there was a need to turn informal mining into a formal practice for it to benefit more from mainstream market and Government initiatives.

“We have advanced many options for formalisation. Dialogue is key so that these groups are capacitated for growth and business mentorship, among many other aspects. Policy frameworks are better crafted together than when others are shying away due to informality. Informal mining should just be turned into formal mining,” he said.

Hon Mkaratigwa said due to informal mining, there was no environmental reclamation, rather more land degradation and conflicts.

He said with informal mining there was no guarantee for a future in the business and that resulted in side marketing of the minerals to the black market.

“Also but if you look at their production capacity where they supply to the Government buyer, you see that they need mentorship otherwise they can easily be tamed. We have been trying to advance mopping them into the formal sector and there is still more to be done through amendments of various Acts. In the meantime, at least they should be supported through administrative means, to push them back to selling to the Government buyer while showing
them the merits of the same.”

Trade unions in Africa have time and again called for artisanal and small-scale mining (ASM) to be formalised as a way of transforming the sector. Regional trends have shown that in many countries, 70 to 80 per cent of small-scale miners are informal.

Informality has brought along with it damaging socio-economic, health and environmental impacts, which trap the majority of miners and communities in cycles of poverty and exclude them from legal protection and support.

Hon Mkaratigwa said Zimbabwe has tried to push for reduction of bureaucracy and any form of discrimination by any means, with less exclusion meant to promote formality. In terms of the Draft Mines and Minerals Amendment Bill, he said it should be among the key priorities during this session of Parliament.

This comes as the sector is being governed by the Mines and Minerals Act of 1961, which has been described by stakeholders as archaic.Since it was crafted over five decades ago, the Act is reportedly creating a lot of confusion in the mining sector which stakeholders believe would be eradicated if the new bill is passed into law.

“The Draft Mines and Minerals Amendment Bill should be among the key priorities in this session of Parliament and in this Government year. It has been placed among the key enablers of the 2022 Budget targets and the national vision for the upper middle-income economy,” said Hon Mkaratigwa.

He said the Draft Bill still has to pass through the “hall of critics before it goes to the hall of fame”. Zimbabwe Miners Federation (ZMF), which represents small-scale and artisanal miners is on record saying 84 percent of small and artisanal miners are not registered.

Commenting on that ZMF chief executive officer Mr Wellington Takavarasha said only 16 percent of small or artisanal miners were formerly registered, which meant that Government was not deriving optimum benefits from the “illegal activities” of small and artisanal miners.

Lack of formalisation has seriously affected production and deliveries from small and artisanal miners, with the National Mine Workers’ Union of Zimbabwe (NMWUZ) president Mr Kurebwa Javangwe Nomboka calling for the need to formalise informal miners who are not benefiting the country by selling their minerals on the black market.

“Informal miners sell their minerals through illegal means and as a union we propose the absorption of informal miners into the legal tunnels of mining with the Government assisting them in their mining activities by monitoring their mining methods to avoid disasters.”

Informal miners are said to be lacking sophisticated equipment, working capital and the right knowledge, among others, which have accounted for their inconsistent total annual gold deliveries to Fidelity Printers and Refineries (FPR).

Meanwhile, environmentalists have said the increase in illegal mining activities was heavily scarring the environment. The Environmental Management Agency (EMA) said informal mining activities were also causing problems such as water pollution, deforestation, poor soil fertility and limited access to land for agriculture productivity.

Illegal mining in Zimbabwe has become the major cause of other environmental problems such as veldfires with a 2021 environmental report showing that illegal mining contributed to 42,81 percent towards veldfires while land clearing constituted 2,89 percent and arson 28,3 percent.

EMA education and publicity manager Ms Amkela Sidange said: “The study showed that we have over 1.5 million illegal miners in the country and over 11 100 hectares is degraded due to illegal mining. Over 1 500km of rivers have been affected by illegal mining. Areas like Matobo District have lost about 142 livestock between 2017 and 2021 that have fallen into the pits left by illegal miners across the district.”

She said as an environmental agency, they were lobbying for a fiscal consideration from Government so that they could be able to roll out rehabilitation of decommissioned mines in the country. Nationwide decommissioned and abandoned mine sites are said to be a threat to humans and animals.

“Informal miners sell their minerals through illegal means and as a union we propose the absorption of informal miners into the legal tunnels of mining with the Government assisting them in their mining activities by monitoring their mining methods to avoid disasters.”

Informal miners are said to be lacking sophisticated equipment, working capital and the right knowledge, among others, which have accounted for their inconsistent total annual gold deliveries to Fidelity Printers and Refineries (FPR).

Meanwhile, environmentalists have said the increase in illegal mining activities was heavily scarring the environment. The Environmental Management Agency (EMA) said informal mining activities were also causing problems such as water pollution, deforestation, poor soil fertility and limited access to land for agriculture productivity.

Illegal mining in Zimbabwe has become the major cause of other environmental problems such as veldfires with a 2021 environmental report showing that illegal mining contributed to 42,81 percent towards veldfires while land clearing constituted 2,89 percent and arson 28,3 percent.

EMA education and publicity manager Ms Amkela Sidange said: “The study showed that we have over 1.5 million illegal miners in the country and over 11 100 hectares is degraded due to illegal mining. Over 1 500km of rivers have been affected by illegal mining. Areas like Matobo District have lost about 142 livestock between 2017 and 2021 that have fallen into the pits left by illegal miners across the district.”

She said as an environmental agency, they were lobbying for a fiscal consideration from Government so that they could be able to roll out rehabilitation of decommissioned mines in the country. Nationwide decommissioned and abandoned mine sites are said to be a threat to humans and animals.

ZMF Matabeleland South chairman of the Small-Scale Miners Association Mr Philemon Mokuele said there was a possibility of rehabilitating unused mines through formalisation of the artisanal and small-scale miners.

“There is a need for registration of all formal and informal miners, allocate them workable land for mining and take them for short courses so that they understand the importance of environment and safe methods of mining,” he said.

Zimbabwe Young Miners Foundation (YMF) chief executive officer Mr Payne Kupfuwa said they were working on formalising young artisanal and small-scale miners so as to upscale them into formalised medium scale miners.

“Our aim as young miners is to positively contribute to the realisation of a US$12 billion mining economy target which should see Zimbabwe edging closer to the goal of being an upper-middle income country by 2030. This can be achieved by working together with strategic partners to formalise and grow young miners’ enterprises into professional medium scale entities so that they boost their production capacities,” said Mr Kupfuwa.

Formalisation of illegal miners in Zimbabwe will see Government achieving targets set for the mining sector. In 2019, President Mnangagwa launched the US$12 billion mining industry roadmap where gold is expected to contribute US$4 billion, platinum US$3 billion while chrome, iron, steel, diamonds and coal will contribute US$1 billion each. Lithium is expected to contribute US$500 million while other minerals contribute US$1,5 billion.

Mines and Mining Development Minister Winston Chitando said the US$12 billion mining industry target by 2023 was achievable as part of the broader macroeconomic roadmap towards achieving an upper middle-income economy by 2030.

The Sunday News