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Occupational Health and Safety in the ASM sector

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Occupational Health and Safety in the ASM sector

Artisanal and small-scale mining (ASM) is a source of livelihood in Zimbabwe. It employs more than five hundred thousand workers directly and three million indirectly (Parliament Zimbabwe, 2017). However, ASM activities can damage the environment and pose health and safety risks to workers and surrounding communities. This could be attributed to poor mining and processing practices due to lack of technical knowledge.

Artisanal and small-scale miners (ASM) employ rudimentary mining methods and lack formal plans and procedures to guide their mining activities up to mine decommissioning. There are no efforts to rehabilitate mined areas. Poor mining practices include operating in shallow and highly unstable grounds, and depillaring abandoned mines. These mining practices have resulted in fatal accidents such as those reported at Globe and Phoenix Prince mine (Kwekwe), Task mine (Chegutu), and Ran mine (Bindura). Emergence preparedness and response in these accidents was considerably poor owing to low worker capacitation. Hazard identification, risk assessment and risk management are required to prevent occupational accidents.

Artisanal mining is regarded as an illegal activity in Zimbabwe (Mines and Minerals Act, 1996; Gold Trade Act, 2001; Parliament Zimbabwe, 2017). Lack of regulatory and policy framework and decent work principles prevents formalisation of this sector in Zimbabwe. This complicates improvements in safety standards, adherence to mining regulations and environmental performance.

Occupational Health and Safety (OHS) issues of ASMers are compromised. Working in confined places with poor ventilation using poor drilling technologies exposes ASMers to upper respiratory diseases such as silicosis. Injuries, fatalities and disabilities have been reported among this category of workers. Cases of HIV/AIDS and Sexually Transmitted Infections (STIs) are prominent due to inadequate f health facilities and low levels of awareness and risk perception. All these OHS and environmental issues discourage sustainability of mining operations.

An average of 60 workers die in the artisanal and small-scale mining (ASM) sector every year. Miners often suffer from occupational diseases such as pneumoconiosis and tuberculosis. Also work-related injuries, fatalities and disabilities occur from collapse of ground due to poor mine design and at times flooding, accidental detonation of explosives and inundation. Apart from devastating effects on workers, mining has environmental effects. For example, use of hazardous chemicals such as cyanide and mercury which often find their way into the aquatic environment, affects ecosystem health. Mining operations may leave behind degraded landscape.

It is consequently imperative to prevent incidents and occupational health problems in the mining communities and promote sustainable mining development. Management at ASM need to prioritise safety of workers and quality of the environment. As guided by Statutory Instrument (S.I) 109 (Mining (Management and Safety)), mine managers need to approve safety standards and enforce safe practices at mine sites. Mining teams should be dedicated to conducting mining responsibly to protect people, property and the environment. They should comply with applicable SHEQ laws and policies, Standard Operating Procedures (SOPs), SHEQ plans, and set SHEQ leading and lagging performance targets and indicators. Scheduled inspections, Task performance observations, SHEQ audits and risk assessments, and trainings are also helpful in strengthening and improving compliance with SHEQ requirements. The provision of SHEQ related information, and training ensures that all workers:

  • are not injured or fall ill by the work they do.
  • develop a positive SHEQ culture where they become second nature to everyone.
  • find out how one could improve SHEQ issues and production in the confinement of mining costs.
  • meet all relevant applicable legal SHEQ obligations.

Importance of safety, health, environment, and quality management issues

All workplaces have the legal obligations to conduct their production activities with safety in mind. Adherence to recommended SHEQ standards promotes environmental sustainability and ensures that everyone comes to work and goes back home safely every day. It means safe uninterrupted production. This is good to fend for one’s family. SHEQ standards and practices ensure that the social license will be intact throughout the mining life cycle. Safety management practices are a crucial component of the mining operations and are part of the three pillars where mining stands on, and these include production, cost, and safety.

 Three Pillars of mining

A mining operation generally rests on three interacting pillars: safety, production, and cost (Fig. 1).

 

 

Fig. 1. Three pillars of mining (Source: Zimbabwe Environmental Law Association)

The three pillars are the balancing factors at any mining operation. A safe production model ensures that the three pillars are balanced and there is no over emphasis of one of the pillars. Compromising safety will influence both production and cost. The three-pillar model suggests that putting more emphasis on production would mis-balance safety and this will have an overall cost overrun. The mismanagement in any of the pillars will result in over-expenditures through either loss in production, high emergency response costs, hospital bills or mine rehabilitation costs.

Safety, health, environment and quality management (SHEQ) practices

SHEQ practices foster safe production at a mine site. Priority should be put on factors that ensure a vibrant SHEQ practice in ASM sector. Sound SHEQ practices are comprise of standards, procedures, communication and compliance.

Standards and procedures

Standard operating procedures (SOPs) are essential to ensure that activities are governed by global SHEQ standards and legislation.  These include:

Communication

Communication means interactive dissemination of all SHEQ issues and performance standards with miners, management and other relevant stakeholders. Effective   communication is interactive, informative, positive and productive. Communicating OHS information effectively is crucial to prevent work-related diseases, injuries and fatalities. The message should get across to all miners. Communication is done through crew or toolbox meetings, work site visits, staff meetings, management review meetings and safety bulletin boards.

Compliance

Any effort to ensure a safe working environment requires stringent monitoring and enforcement. This may be done through:

  • targeted and responsive inspections,
  • SHEQ audits,
  • a SHEQ strategy,
  • disciplinary policy.

 

Source: ZELA

Zera culls fuel suppliers

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Zera culls fuel suppliers

ZIMBABWE Energy Regulatory Authority (Zera) has effectively shut the door on numerous companies that have been shipping fuel into the country after licensing a measly 34 companies  from a record 130 entities that have been operating in the petroleum subsector.

Zera chief executive Addington Mazambani told journalists on Friday that as of Thursday, it had processed 34 licences ahead of the April 30, 2021 deadline.

In March, Zera announced a revised set of requirements for oil-importing companies, which include US$24 320 per annum licence fee, proof of ownership of three retail sites and proof of fuel imports of a minimum of 10 million litres per annum from 2016-2019.

Licences are renewed annually.

Zera also announced that since the 2019 procurement licences were made valid in 2020, all companies which procured fuel in 2020 were required to pay $2 million exclusive of value-added tax by October 2021, failure of which licences would be cancelled.

Zera has been embroiled in a bitter legal wrangle with indigenous fuel entities after announcing stringent licensing requirements last year which small players viewed as intended to promote bigger players in the sector.

Consequently the High Court ordered that 2019 licences be rolled over to 2020. Since last year, the energy regulator has been engaged in stakeholder consultations on the requisite licensing requirements.

Petroleum firms, under the banner of Direct Fuel Import Group and the Indigenous Players Association of Zimbabwe, last year rejected the “outrageous” conditions announced by Zera and accused the regulator of promoting the interests of big foreign operators.

Zera hiked oil importation licensing fees to $2 million a year, from US$23 000 in 2019, requires proof of ownership of at least 15 fuel stations and a performance bond of $30 million. The licensing regime included production of proof that potential licence holders had previously imported at least 10 million litres of fuel, much to the chagrin of indigenous players.

Now, after a year-and-half battle, Zera has started issuing licences.

“As of yesterday (Thursday)  we had received about 34 applications, which qualify to be issued with licences, and all the licences should be out by end of day today (Friday).We no longer issues physical licences, the system automatically emails the licence to the email address that would have been given during application. So those who qualify will have their licences today and today is the deadline.

“So, from tomorrow onwards those without licences will stop operations. But obviously there are cut off issues for those which had already ordered their fuel which is still in transit so we will have to cater for those,” Mazambani said

He said interest for the procurement of fuel had increased over the past decade, with figures showing that companies that were shipping fuel into the country grew from eight in 2012 to 130 as of 2019.

 

NewsDay

ZDAMWU Regrets Govt’s Look East Policy For Bringing Chinese Employers

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ZDAMWU Regrets Govt’s Look East Policy For Bringing Chinese Employers

A MINE workers group has bemoaned the ushering in of Chinese nationals into the country’s investment space, insisting the Asians were among the worst employers ever seen.

In a statement to mark Workers Day weekend, Zimbabwe Diamond and Allied Minerals Workers Union General Secretary Justice Chinhema said the country’s Look East policy which ushered in Chinese investors into the country had brought its own nightmares.

Under then President Robert Mugabe, Zimbabwe turned to Asia for new allies after its western friends had deserted the Harare administration for alleged rights abuses, poll theft and high-level corruption.

Workers in the mining sector however feel the policy has brought more harm than good.

“We are not going to rest in fighting and confronting excessive exploitation of mine workers in Zimbabwe brought about by the Look East Policy,” Chinhema said.

“We are demanding serious investors in the mining sector; not some we currently have who are exploiting workers, looting our resources and destroying our ubuntu in communities that they are operating in.

“(An injury to one is an injury to all). Accidents are happening in Chinese owned mines and concealed against the mining safety and health regulations.

“This is a fight which we are not going to back down on, in demanding mine workers total emancipation.”

The union leader said mine workers had no cause to celebrate Workers’ Day because of their sorry circumstances.

“This day today is supposed to be a day in which workers must be celebrating being a worker, but looking around in our mining sector, there is nothing to smile about,” he said.

He added, “Mine workers today face a plethora of challenges which are well documented despite being a vital cog in our economy.

“They earn far less than their compatriots in the region. Mine workers have for a long time cried against slave wages which they are being given by their employers.

“Mine workers today, despite the sector being labour intensive, are working long hours under very difficult conditions.

“The workplace is no longer safe; several mines have collapsed, killing several workers and families losing their bread winners.

“While the employers are selling the minerals in foreign currency, most mine workers are not getting their salaries in that currency instead.

“Despite creaming outrageous profits for their various mining ventures, workers still at the end of the day receive slave wages,” he said.

Zdamwu said the union was not going to back down in demanding what was due to workers.

“Zdamwu will not tire in demanding what is due to the workers. As Zdamwu, we will not tire in demanding Covid-19 allowances for the workers, if essential services are being awarded Covid-19 allowances, our gallant mining sons and daughters are equally essential service providers who are entitled to at least US$200 Covid-19 allowances.

“If the bible encourages giving to Ceasar what is unto Ceasar, ZDAMWU encourages employers to give workers their dues. That is non-negotiable.

“This year our theme being ‘confronting excessive exploitation of mine workers in Zimbabwe brought by the Look East Policy, black and white cartel & looters towards our independence,” have come at an opportune moment when workers represented by ZDAMWU are fighting tooth and nail to reclaim their rights in the mining sector,” he said.

Record metals prices catapult mining profits beyond big oil

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Record metals prices catapult mining profits beyond big oil

Major oil producers, for decades the natural resource industry’s top earners, are being eclipsed by once-smaller mining peers who are churning out record profits thanks to red-hot metals markets.

The mining windfall is the latest sign of a boom in iron ore, copper and other metals that’s sending an inflationary wave through the global economy, increasing the cost of everything from electrical wires to construction beams.

In the corporate world, the top five iron ore mining companies are on track to deliver bottom-line profits of $65 billion combined this year, according to estimates compiled by Bloomberg. That’s about 13% more than the five biggest international oil producers, flipping a decades-old hierarchy.

THE MINING WINDFALL IS THE LATEST SIGN OF A BOOM IN IRON ORE, COPPER AND OTHER METALS THAT’S SENDING AN INFLATIONARY WAVE THROUGH THE GLOBAL ECONOMY

“It’s wild,” said Mark Hansen, chief executive officer of London-based trading house Concord Resources Ltd. “The value right now has shifted from energy to metals.”

The eye-watering mining profits are mainly a product of iron ore, the world’s biggest commodity after oil. The crucial steelmaking ingredient has been trading just a whisker below $200 a ton and on par with record prices from a decade ago, when voracious Chinese demand triggered what became known as the commodities supercycle. The largest Australian mining companies can pull a ton of iron ore from the ground for less than $20 a ton.

Copper prices have also jumped near to all-time highs, crossing the $10,000-a-ton barrier for the first time in a decade. A basket of base metals including aluminum, nickel, copper, tin, lead and zinc is trading at levels only reached twice in modern history: in 2007-08 and 2011.

For the big five iron ore miners — BHP Group, Rio Tinto Group, Vale SA, Anglo American Plc and Fortescue Metals Group Ltd. — this fiscal year will be just the second time this century that they’ll out-earn their oil peers, estimates show. It would be only the first time if their oil rivals hadn’t been weighed down by huge writedowns in 2020.

FOR THE BIG FIVE IRON ORE MINERS — BHP GROUP, RIO TINTO GROUP, VALE SA, ANGLO AMERICAN PLC AND FORTESCUE METALS GROUP LTD. — THIS FISCAL YEAR WILL BE JUST THE SECOND TIME THIS CENTURY THAT THEY’LL OUT-EARN THEIR OIL PEERS

During the previous commodity boom, which peaked between 2008 and 2011, Big Oil easily made larger profits than Big Mining. A decade ago, for example, the five energy majors — Exxon Mobil Corp., Chevron Corp., Royal Dutch Shell Plc, Total SE and BP Plc — delivered adjusted earnings that were double those of the big five iron ore miners.

Now, the surge in mining profits is another headache for the large oil companies as they struggle to attract shareholders amid mounting concern over climate change. While the miners are already returning more cash to investors, the oil producers are only just starting to do so, after some cut dividends last year.

The miners also have a better story to tell: while oil contributes to a warming world, some metals — particularly copper — are key to building a greener future based on electric cars.

Inflation concerns

The mining windfall matters beyond the natural resources industry. It’s an indication that companies across multiple sectors will face rising costs, which at some point could translate into broader inflation, potentially hitting bond and foreign exchange markets.

“After a year of strong commodity-price increases, inflation pressures are now building downstream in supply chains,” said John Mothersole, pricing and purchasing research director at consultant IHS Markit Ltd.

So far, central banks — notably the U.S. Federal Reserve — have largely disregarded those pressures, saying they’re one-time price surges that are unlikely to start an inflationary problem. The Fed said April 28 that while inflation has risen, the increase largely reflects “transitory factors.”

Iron ore is in a dream scenario: demand, especially from China, is rampant, while supply is constrained. China, which accounts for about half of global steel production, is making a record amount of the metal, while industrial output is surging across the rest of the world as huge stimulus packages fuel a recovery from the pandemic. At the same time, producers are struggling to keep mines running at full capacity.

Returning cash

Yet underpinning the tightness in metals is a strategic decision made by the big miners half a decade ago. After spending years pumping ever-expanding supply onto the global market, they ripped up growth plans and focused instead on shareholder returns. The result was that supply largely stopped rising and prices started to pick up.

The good news for investors is that during this wave of high prices they’re likely to see more of the profits. Unlike in the last commodity supercycle, the miners — still bruised from a series of disastrous deals and projects — are reluctant to pour their extra earnings into acquisitions or new mines, instead choosing to distribute record dividends.

That point was made clear by Vale’s CEO last week, after the Brazilian mining giant posted its best quarterly result since the high-point of the supercycle a decade ago.

“You shouldn’t expect extreme” spending, Eduardo De Salles Bartolomeo said on Tuesday. “There is nothing on our radar like that. And secondly — the question that a lot of people make so I’ll take the opportunity to make it clear — there is no transformation and M&A on our radar as well.”

Big Oil is now doing the same, with companies from Exxon to BP abandoning oil output growth plans in an effort to regain shareholder trust: they have slashed spending on new projects, and after paying down debt, are promising to reward investors rather than develop new fields and refineries as they did during the previous cycle. That’s likely to result in lower oil supply later this decade, which in turn could support prices.

Bloomberg News

Mimosa donates bulls, heifers to Zvishavane farmers

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Mimosa donates bulls, heifers to Zvishavane farmers

PLATINUM producer, Mimosa Mining Company has donated 118 cattle to Zvishavane communal farmers to boost the country’s livestock revitalisation programme.

The Zvishavane based mine donated 73 heifers and 45 bulls to Mhondongori and Kromedral villagers last week.
Speaking at the handover of the cattle, Zvishavane-Ngezi Member of Parliament Cde Dumezweni Mawite said the donation was testimony of the company’s vision of investing beyond mining and its commitment to sustainable corporate social responsibility programmes.

“Mimosa Mining Company’s footprint speaks for itself and the company’s interventions in agricultural activities have impacted positively in our communities.

“It is on record that most households in Zvishavane and Mberengwa have benefitted from the previous 285 breeding bulls and 36 heifers which were injected into the community since 2015.

“It is heartwarming to realise that farmers have started receiving good quality Boran Brahman and Tuli calves from the artificial insemination and breeding bulls programmes of more than 130 cows,” he said.

Mimosa Mining general manager Mr Stephen Ndiyamba implored the mining sector to co-exist with the community and be part of a multi-sectoral approach to revitalising and reforming Zimbabwe’s agriculture sector.

Over the years Mimosa has also participated in infrastructure development projects through supporting agricultural establishments guided by its philosophy to nurture partnerships and invest beyond mining.

Meanwhile, chiefs in Zvishavane have urged the beneficiaries of the donation to look after the bulls and heifers to ensure sustainability of the project.

The mine has refurbished five dip tanks in the district to meet the standard requirements of the Department of Livestock and Veterinary Services.

 

The Sunday News

Gold panner burnt to death, 3 killed in separate accidents

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Gold panner burnt to death, 3 killed in separate accidents

A SUSPECTED gold panner was burnt to death while sleeping in a shack at Fernhill 33 in Esigodini last Thursday.

Matabeleland South provincial police spokesperson Inspector Loveness Mangena said Busani Ngwenya (46) was burnt to death after his thatched shack caught fire. She said on the day, Ngwenya was having quality time with his friend and when they came back, they made fire close to his shack before they went to sleep. Insp Mangena said the shack caught fire at night while he was asleep.

The friend had gone to his place when the incident happened.

Meanwhile, a 45-year-old man died on Thursday after he was struck in a suspected hit and run accident while he attempted to cross Plumtree Road in Bulawayo. In another incident on the same day, a 29-year-old man died after he was hit by a truck while he was jogging near SOS Village along the Victoria Falls Road.

In a statement, Bulawayo Provincial deputy police spokesperson Assistant Inspector Nomalanga Msebele said Masimba Marunya of Fourwinds died when he was hit by a car around 7pm while attempting to cross Plumtree Road, near Donnington.

“The suspected motorist did not stop after the accident. Marunya’s body was taken to United Bulawayo Hospitals for post mortem,” she said.

Asst Insp Msebele appealed to members of the public with information regarding the accident to contact police.

She said on the same day, Delight Dube (29) of Makokoba died after he was hit by a car while jogging. Asst Insp Msebele said Dube was jogging along Lady Stanley Road, near SOS Village, Victoria Falls Road. when truck driver attempted to overtake another vehicle along the road and hit him. His body was also taken to UBH for postmortem.

 

The Sunday News

Capital raise puts Invictus in ‘excellent’ position: CEO

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Capital raise puts Invictus in ‘excellent’ position: CEO

A SUCCESSFUL US$6,2 million capital raise by Invictus has put the company in an “excellent” position to complete a seismic acquisition programme, its chief executive Scott Macmillan has said.

Invictus recently completed an oversubscribed AUS$8 million (US$6 235 500,04) capital raise via a share placement to new and existing institutional and sophisticated investors.

This allowed it to award a seismic acquisition contract to Canadian firm Polaris Natural Resources Inc for the former’s 2D seismic programme in the Cabora Bassa basin at the end of the quarter. Polaris is Canada’s long-standing seismic company.

“This has been an excellent quarter for the company which has seen us complete several significant milestones and build on our strong foundations,” Macmillan said in a statement accompanying the company’s first quarter report released yesterday.

“The completion of a strongly-supported capital raise has put the company in an excellent position to complete our upcoming seismic acquisition program which will commence in Q2 and then lead to an eagerly awaited high impact basin opening drilling campaign.”

Invictus intends to have Polaris conduct, process and interpret a minimum of 400-line kilometres of 2D seismic programme in order to refine the Muzarabani-1 drilling location and well path and identify additional prospects for the upcoming drilling campaign.

Polaris is expected to begin mobilising the seismic equipment and personnel to Harare in the coming weeks in preparation for the acquisition before deploying to the field and commencing data acquisition in the second quarter.

“The company is also pleased to have Barry Meikle join the team as seismic project manager. Barry is based in Zimbabwe and has extensive experience in onshore seismic acquisition projects in PNG with Total and Interoil, and project management expertise with oilfield service companies in east Africa and is a valuable addition to the Invictus team,” Macmillan said.

Since late 2018, Invictus has been struggling to launch the Cabora Bassa project, which encompasses the Muzarabani Prospect believed to have multi-trillion cubic feet worth of liquids and rich in conventional gas-condensate.

However, recent developments such as the petroleum exploration development and production agreement (PEDPA) with the government are finally moving the project forward.

“The execution of the PEPDA with the Republic of Zimbabwe puts in place the necessary framework to rapidly develop the Cabora Bassa project on exploration success and provide a 25-year production licence,” Macmillan said.

“We look forward to commencing the seismic acquisition campaign in the coming quarter which will unlock additional value for the company and delineate the optimal drilling location to test the world class Muzarabani prospect.”

The PEDPA also provides for special economic zone status for the Cabora Bassa project which will facilitate a host of fiscal and non-fiscal incentives over the life of the project. These include legal and fiscal stability, offshore banking, zero capital gains tax and tax holiday periods and 15% corporate rate thereafter.

Macmillan said funds from the capital raise would enable Invictus to accelerate the company’s exploration campaign throughout the remainder of this year.

 

NewsDay

World’s industrial comeback drives metals to multi-year high

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World’s industrial comeback drives metals to multi-year high

Industrial metals from copper to aluminium to iron ore have rallied to the highest level in years. 

The reasons for their gains are plentiful: Copper — critical for everything from electrical wiring to motors and thus a bellwether for the global economy — broke out of its recent range to trade near the highest since the last supercycle as industrial operations ramp up worldwide.

Iron ore, aluminium and steel are meanwhile gaining on speculation that production cuts will shrink supplies just as demand is taking off. And a weaker dollar is making commodities traded in the currency cheaper to buy.

But underpinning the rally is one simple fact: Some of the world’s large economies such as the US and China are recovering from the pandemic, stoking demand for more cars, electronics and infrastructure. 

US President Joe Biden’s $2,25 trillion infrastructure package and bets that more aggressive climate pledges will accelerate the proliferation of solar panels, wind turbines and electric cars are further driving gains and raising fears about metal shortages. This week’s US climate summit only intensified those concerns.

“Biden’s new climate promises and at least lip service by China to greener domestic policies are keeping the demand picture rosy,” said Tai Wong, head of metals derivatives trading at BMO Capital Markets.

Shrinking inventories this week also continued to buttress supply concerns, he said.

Virtually every metal vital to industrial operations gained this week as a result. Copper was up 1,6 percent to cap off the week at $9 551,50 a metric ton in London, the highest closing price since August 2011. 

Iron ore rose in Singapore. Chinese steel futures reached new highs as investors weighed the nation’s commitment to lowering output against strong demand. Shanghai rebar reached the highest since futures began trading in 2009.

Jiangxi Copper Co., China’s top smelter, expects prices to reach $10,000 as plans to curb carbon emissions boost demand for the metal critical to the green-energy transition. 

Meanwhile, orders for copper stored in warehouses monitored by the London Metal Exchange have picked up, with 83,150 tons of metal now earmarked for withdrawal, the highest level since July.

“The outlook for copper has never been better,” said Richard Adkerson, chief executive officer of Freeport-McMoRan Inc., the top publicly traded producer.

Supporting that view are scarce stockpiles, strong demand and a dearth of big new projects waiting in the wings. While banks including Goldman Sachs Group Inc. expect further gains in metals including copper, there are simmering concerns that could still subvert the rally.

Copper had cooled through March and early April on worries about a global resurgence in the coronavirus, and new variants of the virus still pose a threat to plans to reopen economies.  The possibility of reduced stimulus in China could also slow the world’s second-biggest economy and torpedo metal demand.

For now, signs point to economies on the mend. Applications for US state unemployment insurance unexpectedly plunged to a fresh pandemic low. Key indicators for consumer and industrial activity are rising in China. Palladium, a metal used in catalytic converters to curb emissions in gasoline-powered vehicles, reached an all-time high this week for similar reasons. 

Between rising car demand, tightening pollution controls and production disruptions, the world is set to be short on supply for a 10th straight year, according to UBS Group AG.

Meanwhile, Chinese authorities and the broader steel industry have pledged to lower output after reaching record levels last year. 

And China’s steel hub Tangshan is facing a slew of production restrictions amid the push to control emissions. Crude steel production neared a record in March while rebar inventories declined for a sixth consecutive week, signalling strength in demand amid the construction season.

Aluminium prices are also rallying, with London futures up about 20 percent this year, supported by expectations for further supply curbs in China, the biggest producer.

Stoking supply concerns are soaring Covid-19 cases in Latin American nations including Brazil and Chile, which threaten to curb output at mines. 

The price rally has caught the attention of unions and politicians in host nations. The Chilean copper industry is facing a slew of wage talks and the leading presidential candidate in Peru wants to renegotiate contracts with mines to channel more of their profit to communities.

“Consumption’s increasing across Europe, the US and Asia, and then we have supply-side stress in Latin America, coupled with some very strong technical signals,” Michael Cuoco, head of hedge-fund sales for metals and bulk materials at StoneX Group, said by telephone. 

“There really is a perfect storm brewing.”

—  Bloomberg.

‘Lafarge Zim engages Govt on cost’

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‘Lafarge Zim engages Govt on cost’

Lafarge Cement Zimbabwe is seeking Government intervention in reducing key cost-drivers that are making its products uncompetitive compared to its regional peers. 

The group has taken note of efforts such as macro-economic stabilisation through the introduction of the Reserve Bank of Zimbabwe’s foreign currency auction system, but management said there are still factors that are driving up costs for local manufacturers.

For Lafarge, electricity and distribution costs are currently very high. 

“We continue to engage government on a number of cost drivers that will make our industry more competitive such as cost of power (electricity and coal): Cement production is one of the most energy intensive processes consuming an average of 4 to 5 Gigajoules per tonne, which represents 20 percent to 30 percent of total production costs,” said Lafarge Zimbabwe CEO Precious Nyika. 

“Just to give a comparison, the coal price ex-factory is about US$42 per tonne in Zimbabwe, compared to US$30 per tonne in South Africa and Botswana.

“Another major cost driver is distribution. Regional players have benefited from the use of railway systems. As an industry, we envisage we will be able to do the same more frequently. Today, rail cost in Zimbabwe is 7,00 US cents/km/tonne vs 1,79 US cents/km/tonne for 

South Africa and 3,92 US cents/km/tonne for Zambia. Road transportation in Zimbabwe delivers cement at 11US cents/km/tonne vs 7 US cents/km/tonne for South Africa.

“We thank Government as engagements around such issues always bear results and ensure the ease of doing business. The Forex Auction System and the introduction of SI-89 of 2021 are a clear testimony of this result-oriented governance,” she added. 

Notwithstanding the present challenges the group said it remains focused on expansion, as indicated by its new US$2,8 million dry mortars (DMO) plant launched this week.

The DMO project is part of Lafarge-Holcim Group’s wider US$25 million additional investment of its Zimbabwean subsidiary. 

Said Lafarge Zimbabwe chairman Kumbirayi Katsande: “Lafarge Zimbabwe has not been operating in the safe survival mode, but rather we are vying for growth. We are not intimidated by the uncertainties and difficulties which business is facing to one degree or another. We cannot wait for everything to be perfect.”

Lafarge expects 3D printer in Q3

Meanwhile, the group says it expects to bring in its game-changing 3D printing technology in the third quarter of this year. 

Zimbabwe is one of three countries on the continent (along with Malawi and Kenya) where the Lafarge-Holcim is pioneering the technology. 

14Trees, a Lafarge Holcim joint venture with CDC Group, a United Kingdom-based investor, is deploying 3D printing technology at scale to build affordable and low-carbon housing and schools in Africa. 

“We anticipate that we will receive the printer in the third quarter through a subsidiary of Lafarge-Holcim called 14Trees and we look forward to the usual Government support in its importation and subsequent approval for use,” said the CEO. 

This week, the cement producer launched a new US$2,8 million dry mortar mix plant that will be producing the required 3D printing ink for local projects.

3D printing is the moulding of a structure by precisely placing volumes of material in sequential layers on top of each other, constructing from the ground up.

The material is pushed through a nozzle which regulates flow and is guided by computer-controlled positioning process. The material used in the process is cement based with sand and specially designed admixtures as additives.

“Lafarge remains committed to supporting the national housing development agenda through the introduction of new, exciting, game changing technology to address some of the challenges with traditional methods of construction – 3D printing.

“The benefits include increased construction speed; up to 70 percent faster than conventional method, enhanced sustainability as less materials are used (50mm thick walls versus 140mm) and affordability as construction costs are estimated to come down as much as 20 percent,” she said. 

To showcase the capabilities of 3D printing, Lafarge Zimbabwe will construct 10 units in Knockmalloch under the affordable housing project that is currently underway.

“This project will afford relevant stakeholders to witness and experience the capabilities of this and innovative technology and it is anticipated that this will attract more projects towards the use of the technology to provide decent affordable housing starting in Malawi,” added Nyika.

“With its high speed of construction and optimised material use, this technology reduces the carbon footprint for building new homes by up to 70 percent.”

 

Business Weekly

Zimplats held back by Zim tag

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Zimplats held back by Zim tag

OUR recent meeting with Finance minister Mthuli Ncube highlighted that the country had become much more investor-friendly.

It was also clear that the positive developments we are seeing today are the result of a plan that was started three years ago.

Zimbabwe is on track to run a current account surplus for the third year in a row and it has started to repay small amounts to international lenders — the first step in restoring Zimbabwe’s ability to access international funding.

The government is showing a lot of discipline in resisting the temptation to print large amounts of money and in addressing the fuel and maize subsidies.

The benefit of removing the fuel subsidy was not just the saving on each litre of fuel consumed, but also a large reduction in the total fuel consumed as market-related prices stopped cross-border smuggling, where people bought fuel cheaply in Zimbabwe and sold it at higher prices in neigh­bouring countries.

Even some factors outside Zimbabwe’s control turned from headwinds into tailwinds.

Prices of key exports such as gold and platinum group metals (PGMs) declined between 2012 and 2018, but have seen a strong recovery recently.

The severe drought in 2018/19 not only impacted agriculture, but the low water levels of the Kariba Dam also had a big impact on electricity generation.

The drought has ended and it looks like Zimbabwe will produce enough maize to meet the country’s demand this year — a spectacular turnaround from the past decade where production only met about half of the demand.

What is particularly positive is that agricultural output is not only improving as a result of better rainfall, but also because of better planning. Similarly, the increase in precious metal exports is not just because of higher prices, but is also due to policy changes that encourage investment in the mining sector.

We are really excited about the investment opportunities that arise when share prices reflect overly pessimistic perceptions.

Zimplats, which is currently the largest holding in our Africa frontiers strategy, is a case in point.

Zimplats is a Zimbabwean PGM mine and is a subsidiary of Impala Platinum, one of the largest PGM producers in the world.

Zimplats is a world-class mine: it is a shallow, mechanised mine that is low on the cost curve, has a predictable production profile and has sufficient reserves to last for almost 40 years.

In addition, the company operates in an industry with supportive fundamentals.

Demand is well supported as more stringent emission regu­lations force vehicle manufacturers to increase PGM loadings, while years of low capex across the industry means that there is not a lot of new supply coming online over the next few years.

The company has a fortress balance sheet, with a net cash balance of $226 million as at December 2020.

This is more than 10% of the company’s current market capitalisation and, given where PGM prices are currently, we believe this cash balance has grown substantially in the first few months of 2021.

Importantly, most of the cash is held outside Zimbabwe.

Our investment in Zimplats has done incredibly well for our clients, with the share price tripling over the past two years.

However, we don’t believe the company is expensive simply because the share price has increased.

The company still trades on a very attractive multiple — Zimplats trades on a forward price-to-earnings ratio of just three times and has a double-digit dividend yield.

Even more appealing is the fact that these multiples do not capture the expansion plans announced by the company recently.

What we like about the expansion is that this is a low-cost, low-risk investment, which will have a meaningful positive impact on earnings over time. We estimate that this investment will increase annual production by approximately 30% from 2023, and at current commodity prices, we estimate that the payback period on this investment will be less than two years.

In our view, the main reason why Zimplats trades on much lower multiples compared to its peers is the fact that it is a Zimbabwean business.

We think there is a general lack of understanding of how much property rights have improved over the past few years. In 2018, the government started to address indigenisation laws, but the 51% local ownership requirement remained in place for platinum and diamond companies. In late 2020, this requirement for platinum and diamonds was also removed.

Another significant milestone for Zimplats was when its special mining lease was converted to a normal mining lease in 2018. This now gives it the right to mine for the full life of the mine, and also simplifies and reduces its tax burden. These developments are consistent with the message from other Zimbabwean miners, who report that the government has become much more pragmatic, resulting in a more predictable policy environment that enables mining companies to invest in the country.

A big concern for foreign investors looking at Zimbabwe is the value of the currency and currency repatriation. In this regard, Zimplats is completely different from other local businesses. It is an exporter that generates real US dollars.

This puts the business in a strong position in a country where hard currency is in high demand. The government simply cannot afford for production to halt at a mine like Zimplats and has, therefore, been supportive in ensuring that mines can continue with their operations.

Another important point for equity investors is that Zimplats is listed on the Australian Stock Exchange (ASX). In contrast to shares listed within Zimbabwe, which has historically exposed investors to repatriation issues, shares on the ASX do not encounter this problem.

We know that Zimbabwe has seen several false dawns. Many difficult hurdles still need to be overcome before funding from organisations like the IMF becomes a possibility. We also know that it is not impossible that the government will try to access a larger portion of the hard currency generated by this business.

However, one of the most important things we try to do as stewards of our clients’ capital, is to try and price risk appropriately. When we look at Zimplats, we believe that investors are blinded by their negative perceptions of Zimbabwe, and, as a result, the company trades on a valuation that offers a very compelling risk-reward profile to the long-term investor.

 

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