Mining ZimbabweLatest Mining News, Policy and Industry Updates

SINCE lockdown measures to contain Covid-19 around the world have eased industrial metal prices have begun to rise.

This was said by ratings and research agency Standard & Poor’s Global (S&P Global).

However, even though industrial metal prices have risen from the lows experienced in the first quarter of the year, there remains a possibility of a second wave of Covid-19 infections as lockdowns are eased.

“It nevertheless remains a significant downside risk to industrial metal prices for the rest of the year, despite local supply-side impacts that could provide some price support for particular commodities,” the agency states.

S&P Global Market Intelligence commodity analyst Jason Sappor says base metals demand has mostly been supported by China as it started reopening its economy and ramping up production.

China’s purchasing managers index has expanded to above 50, compared with a low of 37 in January.

S&P Global expects the global economy to contract by 2.4% this year, while the Organisation for Economic Cooperation and Development (OECD) expects at least a 4% contraction.

This is under a single hit scenario, but should a second wave hit, it would cause a deeper economic contraction, with the OECD forecasting an 8% contraction should that occur.

Sappor notes that the dollar – which is normally a safe haven asset – index weakness has supported commodity prices. However, the metal industry will still experience pressure this year.

He says the metals sector has yet to recover from Covid-19; metal prices have moved higher but demand and supply, especially, have scaled-down significantly since the start of lockdowns globally.

IRON-ORE & GOLD

Sappor highlights that iron-ore and gold stand out as the London Metal Exchange’s (LME’s) best-performing metals at the moment, with prices increasing on the back of stimulus and lockdowns easing.

Gold has enjoyed increased demand particularly, increasing by about 15% since the start of this year.

S&P Global Market Intelligence commodity analyst Thomas Rutland explains that iron-ore prices have been faring better than the LME prices, mainly owing to surging Chinese production as it ended its lockdown and the negative impact on Brazilian ore supply.

Rutland notes that iron-ore’s demand side has a China-centric recovery, with steel production reaching a monthly record of 92-million tonnes in May to meet pent-up demand. May saw iron-ore stocks in China at lows last seen in 2016.

“The surge in Covid-19 infections in Brazil has stoked iron-ore supply concerns, with Brazilian exports dropping by 29% year-on-year in May. Brazil’s supply has since risen 40% month-on-month between May and June, but we still expect close to 4% lower production in 2020, or 14-million tonnes less, compared with 2019.

“We expect Australia and India to plug this hole in the market, albeit with lower grade material from India’s side,” he states.

Rutland adds that the restocking boom has driven iron-ore prices to above $100/t in June, with only a modest surplus expected this year, as the depth of global recession will weigh on prices in the second half of the year.

On the other hand, gold has traded at above  650/oz for nine weeks and has been supported by fears of a second wave of Covid-19 infections. “We expect this newfound momentum to drive the gold price to more than $1 800/oz,” says Rutland.

He adds that uncertainty around upcoming elections in the US has also driven investors to gold as a safe-haven asset.

ZINC & NICKEL

Sappor says zinc and nickel prices are still lower, owing to the negative impacts on demand that have prevailed in the last few months.

In November, S&P had forecast a rise in the prices of zinc and nickel this year; however, it says zinc and nickel prices have instead been slashed by 14% and 21% year-on-year this year.

Global nickel demand is due to drop by 8.5% year-on-year this year. On the supply side, surging Indonesian primary output will heap additional downward pressure on prices.

The primary nickel market will move to a 100 000 t surplus this year, with the average LME nickel price expected to decline by 9% year-on-year to $12 750/t.

Sappor says Indonesian primary production will surge by 46% year-on-year this year to 550 000 t, while the global primary nickel market will likely record a 100 000 t surplus this year.

Sappor says global zinc demand this year will fall by 409 000 t to 13.3-million tonnes. On the supply side, rising Chinese smelter inventories of metal are supporting supply, while global refined zinc output will likely decrease to 13.4-million tonnes.

This while global mine output for zinc will decrease to 13.3-million tonnes, lead by the drag in Chinese mined production. However, there will still be a global supply surplus of 115 000 t of zinc, with a lower price of $2 000/t.

COPPER & BATTERY METALS

The LME copper price is still down 5% year-on-year since January, with demand continuing to be impacted by reduced economic activity globally. However, stimulus packages in China are expected to bolster demand for copper in the near term.

Sappor and Rutland agree that neither mined nor refined copper was impacted as much as expected by the pandemic, and therefore was the strongest performing metal on the LME during Covid-19.

S&P maintains its 2020 refined copper market balance estimate at 182 000 t surplus and the price forecast of about $5 700/t.

Copper prices are expected to increase in the second half of the year and throughout 2021, supported by large decreases in mined copper supply this year.

Should a second wave of Covid-19 infections hit the world, especially China, copper is likely to again withstand adverse impacts.

Cobalt prices have been cut by 20% since November last year, but are expected to rise before the end of the year.

Covid-19 has slowed growth in the electric vehicle (EV) industry. Sappor says passenger plug-in EV sales will decline by 7.6% year-on-year this year to 1.9-million units, owing to lower global sales and reduced subsidies in China.

The lithium market will enter a low price environment, given the sustained surplus.

The cobalt market will experience recovered prices from 2021 and likely remain above $20/lb from 2022 onwards, sustained by a market deficit. This should induce more cobalt production and mining.

EXPLORATION & CAPITAL EXPENDITURE

Sappor and Rutland anticipate that exploration budgets will have experienced a 29% year-on-year decline to $6.9-billion by the end of the year, as a result of Covid-19 delays and restrictions.

Copper budgets are expected to be hit hardest, and will likely fall by 40% year-on-year this year, while gold exploration budgets are projected to decrease by 20% year-on-year.

The global nonferrous exploration budget is likely to drop by 29% year-on-year this year.

S&P says the amount of drilling done globally remains near multiyear lows, especially in Australia and Canada, owing to their big junior mining sectors.

The agency finds that all capital expenditure budgets have been slashed owing to Covid-19 and all sub-industries have dropped guidance expectations as a result of the pandemic.

Base metals have been hardest hit in terms of capital expenditure, expected to be down 19% year-on-year this year, and precious metals capital expenditure expected to be down 6% year-on-year this year.

Sappor and Rutland conclude that copper, nickel and zinc prices will recover during the third quarter, but warn that there remains a downside risk to price forecasts, considering a potential second wave of Covid-19 infections.

Mining Weekly

Chaminuka Rural District Council (RDC) in Shamva has accused the Mines Ministry of dubiously allocating mining claims on land earmarked for commercial projects.

Council chairperson Nevson Zhizhinji revealed this at a stakeholders’ meeting.

“We are having problems with one miner, one Mazembe who was given a prospecting licence and allocated a mining claim on land that was gazetted as commercial stands about four years ago. Businesspeople had already begun constructing their business premises,” Zhizhinji said.

The dispute arose after Mazembe, who was recently issued a mining licence at Bent Farm, threatened to demolish shops, a clinic and church building under construction and refused audience with the council, saying he had higher connections.

Zhizhinji added that the stands were pegged a long time ago, in accordance with Lands ministry statutes.

“These stands were pegged years back with other commencing construction. Mazembe began fencing off the area and operating at night after he was issued mining papers, but after complaints were raised we were ordered to stop, of which as council we obliged,” he said.

“To our surprise, he didn’t receive any letter to stop operations; he continued to pump money on disputed land.

That is when all this chaos started.”

Mashonaland Central provincial mines director Tariro Ndlovu said his office was aware of the conflict.

“We had a meeting yesterday where you gave us your grievances, now we are going to compare what is on the ground and on paper and decide on what needs to be corrected,” he said.

Bent Farm was gazetted as a business centre in 1995, however, the policy shift on land use is causing confusion in the community and local authority.

Newsday

CONSTRUCTION of a US$10 million 300MW power plant by Zimbabwe ZhongXin Electric Energy (ZZEE) in Hwange, Matabeleland North Province is underway with the first phase of the project expected to produce 50MW by October this year.

ZZEE is a subsidiary of the Zimbabwe ZhongXin Coking Company (ZZCC), a joint venture project between Qualisave Mineral Resources of Zimbabwe and Yuxia ZhongXin Coking Company of China.

Briefing Mines and Mining Development Minister Winston Chitando and his Finance and Economic Development counterpart Professor Mthuli Ncube during a tour of coal and coking coal companies in Hwange on Friday, ZZEE assistant plant manager, Andreas Hlabangana, said despite investing in coking coal production, they were also building a 300MW power plant whose construction began last year.

“ZZCC has embarked on building a coal-driven power station on the outskirts of Hwange along the Hwange Victoria Falls road, which when completed will contribute 300MW into the national grid,” he said.

Later an interview with Business Chronicle, Hlabangana said: “Construction of Zimbabwe ZhongXin Electric Energy (ZZEE) began in February 2019 with a capital injection of US$9,99 million and the whole construction should take three years but we are striving to complete in two and half years”.

The project is being done in phases of 50MW with the first phase to be completed in October 2020, he added.

In terms of construction work progress, he said boilers for the thermal power plant have been built and are 60 per cent complete while turbines are 10 per cent complete.

“Due to the Covid-19 pandemic, activity on the thermal power project has been affected by the Covid-19 pandemic. While the electrical connection boxes that are supposed to be installed at the power plant are already in the country, the engineers who are supposed to do the installation works are still locked down in China because of the Covid-19 pandemic,” said Hlabangana.

He said on completion the power plant will consume 300 000 tonnes of coal annually and ZZCC has applied to Government for a Coal Special Grant Grant (CSG) in order to enjoy economies of scale once the firm starts producing coal to support its operations.

During his briefing to Ministers Chitando and Prof Ncube at ZZCC before a tour of the power plant, Hlabangana said they were presently receiving inadequate coal supplies from Makomo Resources and Hwange Colliery Company Limited and hence ZZCC has applied for a CSG from the Ministry of Mines and Mining Development.

“The company has two plants requiring 15 000 tonnes of coking coal per month sourced from Makomo Resources and Hwange Colliery Company Limited, but due to their challenges, they have both failed to meet the demand.

“The supply of raw materials is our major challenge hence a CSG claim application, which is still with the Ministry of Mines and Mining Development. Once approved this challenge will be a thing of the past,” said Hlabangana.

It is hoped that once granted the CSG, ZZCC will cut dependency from other players for coal supplies for its coking coal and thermal power station projects.

Hlabangana appealed to Government to increase the retention on export proceeds for coking coal, which was presently pegged at 50 per cent in US dollar and 50 per cent in local currency.

“The suppliers of all raw material and consumables are now requesting that we pay in US dollar so that that they are able to import machinery, equipment and spares for their mines to keep running.

“Considering the exchange rate of the RTGS offered by the Reserve Bank of Zimbabwe versus raw material and consumables that we buy locally, our profit margins are shrinking.

“We propose that our export US dollar retention be reviewed to 80 per cent and 20 per cent RTGS,” he said.

The tour of the coal and coking coal producing firms in Hwange was a fact-finding mission on the challenges bedevilling players in the sector.

The visit is also a precursor to President Mnangagwa’s tour tentatively planned within the next four weeks.

Responding to the issues raised by the business, Minister Chitando said Government will in the next four months through the “Use-it or lose-it” policy repossess underutilised mining titles, which would be reallocated to prospective investors.

In an interview with journalists after the tour, Prof Ncube said he was impressed by the coal and coking mining activities being undertaken in Hwange.

He said the tour was also an eye-opener as Government through his ministry will fine-tune the policy framework to foster productivity by players in the coal sector and the mining industry at large.

“At least l have understood what their issues are and l also appreciate the investments that are taking place in this area.

“For instance, the investors in the production of coke are big employers and their activities will go a long way in contributing to the US$12 billion mining economy by 2023.

“So, my office being in charge of the taxes as you can imagine, l am always trying to see where we can fine-tune the tax incentives for investment,” he said.

Chronicle

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