Mining ZimbabweLatest Mining News, Policy and Industry Updates

Zimbabwe’s gold deliveries dropped by 19 percent to 2.80 tonnes during the month of September from 3.47 tonnes during the same period last year due to crippling power outages, inefficient mining and processing technologies in use, foreign currency shortages and suspected smuggling.

Cumulatively, gold deliveries decreased 26 percent to 20.63 tonnes during the first nine months of 2019 from 28.09 tonnes during the comparative period last year due to inappropriate ore hoisting machinery from the deep mine shafts.

Gold is now the highest single foreign currency earner ahead of tobacco as the country’s highest forex earner but its subdued performance continues to shatter the country’s hope of turning around the economy.

The yellow metal contributes 38 percent of the country’s total earnings and more than 60 percent to the mining sector which happen to be the highest forex earning sector in the country. Independent estimates show that over 20 tonnes of gold were smuggled out of the country due to unfavourable pricing regime of offering miners 55 percent forex retention threshold against 90 percent forex retention offered by side marketers.

This has created arbitrage opportunities in the gold sector and this will have a negative impact to the already fragile economy as gold is the most liquid commodity in the world as countries earn their forex within a fortnight.

Fidelity Printers and Refiners general manager Fradreck Kunaka told Business Times that the country is now pinning hopes on new gold centres and the small scale facility to increase production.

“In September gold deliveries went down 19 percent to 2.804 tonnes from 3.475 tonnes delivered during the same period last year due to forex currency shortages which should buy equipment and consumables together with serious power shortages which mainly affected primary gold producers.”

“Of the 2.80 tonnes extracted in September, 1.964 tonnes came from small scale miners while 0.84 tonnes came from primary producers. Meanwhile, during the same period last year small scale produced 2.72 tonnes against 0.755 tonnes,” said Kunaka.

On the 40 tonne target, Kunaka said the country might fail to reach the target because as it stands, by end of September deliveries still stand at 20.6 tonnes, which is almost half of what the country wants to achieve in the next three months.

He said the sharp decline in gold deliveries during the second quarter acted as a stumbling block in attaining the set target.

“The decline was mainly because of power outages which intensified during the month of June, inefficient mining and processing technologies in use, inappropriate mining methodologies especially at a time when most mines have deepened beyond 30 metres and inappropriate ore hoisting machinery from the deep mine shafts.”

“However, even if we fail to meet the set target, we project an increase in deliveries in the fourth quarter as artisanal and small scale miners are capacitated under the Gold Development Initiative Fund,” Kunaka said.

He said the Fund which aims at assisting miners in acquiring the appropriate mining equipment to enhance their gold production thus increase deliveries to FPR.

Gold Miners Association of Zimbabwe (GMAZ) chief executive Irvine Chinyenze said monetary authorities should increase forex retention to encourage deliveries to Fidelity.

“The fact that monetary authorities have reduced forex retention to 55 percent, gold miners don’t have appetite to sell their gold to Fidelity Printers and Refiners as they are better offers somewhere.

The trick is that they should have raised forex retention to above 80 percent to woo miners,” said Chinyenze.

Zimbabwe is targeting 100 tonnes of gold per year by 2023, a figure which is expected to help the sector to earn US$12 billion yearly and only if forex retention threshold, fundamentals and funding issues are addressed_Business Times

Zimbabwe registered declines in most minerals in the second quarter of this year on the back of worsening power outages, against the backdrop of persistent fuel challenges, foreign currency shortages, and rising inflation, among other factors.

However, the latest statistics from the Reserve Bank of Zimbabwe (RBZ), show that platinum group metals (PGMs), which mineral-rich Zimbabwe is believed to have the world’s second-biggest known deposits after South Africa, offset some of the declines.

Most key minerals underperformed in the second quarter of 2019, compared to the same period in 2018. Declines were recorded for gold (39,6 percent), coal (36,2 percent), diamond (33,9 percent), black granite (30,5 percent), and chrome ore (26,8 percent).

But major PGM minerals namely; platinum and palladium debunked the downward trend after registering growths, during the second quarter of 2019.

Gold output stood at 6 261 kg in the second quarter of 2019, about 40 percent lower than 10 373 kg produced in the same quarter in 2018. This was also 10 percent below the bullion output achieved in the first quarter of this year.

The decline in gold output was exacerbated by power outages, due to the extremely low dam water levels in Kariba Dam, despite the firming international prices.

“Electricity output for the second quarter of 2019 stood at 2 256,4 gigawatt-hours, 8 percent down from the 2 494,60 GWh produced in the first quarter of 2019.

“The decline in electricity output was largely due to lower output at Kariba (Dam), attributed to water rationing, as lake levels decline,” the RBZ noted.

Platinum output, at 3 695kg in the second quarter 2019, was 8,2 percent above the output for the first quarter of 2019 and exceeded output in the second quarter of 2018 by 7,5 percent.

Similarly, palladium output stood at 3 085kg in the second quarter of 2019, about 9,2 percent more than the first quarter of 2019 output and 9,6 percent above output realised in the same quarter in 2018.

“Gold output has also been weighed down by foreign currency challenges, fuel shortages as well as escalating production costs. Gold deliveries to Fidelity Printers and Refiners (FPR) also declined as a result of increased smuggling and diversion of gold to the parallel market,” RBZ said in its quarterly report.

Diamond output increased by 33,7 percent, from 461 348 carats in the first quarter of 2019  to 617 044 carats in the second quarter of 2019, but went down  34 percent compared to output achieved in the same period in 2018.

“The decline was mainly due to reduced throughput at ZCDC, where output declined by 42 percent, compared to the same period in 2018. The ZCDC was adversely affected by working capital challenges, during the period under review.”

Chrome output stood at 0,367 million tonnes in the second quarter of 2019, about 26,8 percent lower than output produced in the same period in 2018.

The output of chrome during the second quarter of 2019, at 0,367 million tonnes, was 12,4 percent below the 0,419 million tonnes produced during the first quarter of 2019.

The central bank said the chrome production continued to mimic developments in the international prices of both chrome ore and high carbon ferrochrome (HCF).

Coal output stood at 0,62 million tonnes in the second quarter of 2019, about 36 percent below the output produced in the same period in 2018. The second quarter of 2019 coal output, however, surpassed the 0,305 million tonnes produced during the first quarter of 2019.

“Prices of coal that prevailed during the second quarter of 2019, were below the cost of production, thus, effectively discouraging production,” the RBZ said.

Nickel output stood at 4 524 tonnes in the second quarter of 2019, up from 3 816 tonnes in the first quarter of 2019. Output during the second quarter of 2019 was higher by12,6 percent, compared to the same quarter in 2018, largely driven by increased production from both the primary and secondary producers.

Business Weekly

Dorowa Minerals, a primary producer of phosphate concentrates in Zimbabwe, plans to diversify into magnetite production to boost its revenue base, an official has said.

Magnetite is a rock mineral and one of the main iron ores which has several domestic and industrial uses including separating coal from waste, while in homes it can be transformed and used as a magnetic decor for refrigerator doors.

Dorowa Minerals general manager Charles Mangadze told New Ziana that the company was sitting on about 26 million tons of iron ore that contains the mineral magnetite.

“Besides phosphate which is used in the fertiliser chain, we also produce a mineral called magnetite. We produce it as a by-product but of late it is now no-longer a by-product because there are so many customers that are willing to take our magnetite,” he said.

“We have got plans to expand the current magnetite circuit. Initially, it was not one of our main products but now that we have got so much  demand we actually have a project that is running right now which we  expect to complete by mid-2020 (that is) the expansion of the magnetite  production line.”

Mangadze said the burgeoning demand was emanating from Mozambican coal companies as well as local ones.

“We currently are producing about 2 000 tons per month which is not meeting the demand so we want to expand our plant so that we can produce up to 8 000 tons per month, The current customers have come to us wanting magnetite of around 12 000 tons per month,” he said.

To expand the magnetite production line, Mangadze said Dorowa would require around US$1.8 to US$2 million.

Meanwhile, Mangadze said Dorowa was facing several operational challenges including power and fuel shortages.

He said the company, which operates 24 hours daily required about 4 000  to 5 000 litres of fuel per day for operations.

The company was working on securing adequate electricity and fuel supplies, he said.

“Currently we are losing 9 to 10 hours of production every day (due to power outages). We recently signed a contract with Zesa to pay (for

electricity) in forex and they promised us that we will be ring-fenced but we are still losing power but not as much as domestic consumers,” he said.

“So we are looking at other sources (of electricity), our plant is a 4-megawatt plant. Right now we have got proposals for a solar plant that  we are looking at.”

Dorowa Minerals is the only phosphate mine in Zimbabwe which is wholly owned by the Industrial Development Corporation.

The phosphate concentrates are a crucial raw material in the production of fertilizers and other agro-chemical products produced by companies including Zimphos, Sable Chemicals and the Zimbabwe Fertiliser Company,  all sister companies of Dorowa under the IDC stable. – New Ziana

BH24 Reporter

HARARE – Mining firm Vast Resources has signed documentation for a new US$13,5 million financing arrangement which is set to cover the costs of reaching production at the both the Baita Plai mine in Romania and the Chiadzwa diamond project in Zimbabwe.

A UK based fund, Atlas Capital Markets, is to be issued US$15mln of secured convertible bonds issued at 90 percent of par, and, carrying 5 percent interest per year. The bonds mature two years after issuance.

Included in the terms is a ‘non-conversion period’ giving protection from equity dilution following the date of the second tranche of bonds – it provides for six-months protection after the first tranche and potentially then 12-months after the second tranche of bonds.

Proceeds will be released to Vast in four tranches, tied to cashflow, with the first tranche comprising some US$7,1 million of bonds.

Vast told investors that the bond financing does not affect the ongoing process with a Swiss bank or other potential financiers and it continues efforts to secure a long-term financing facility for its Romanian assets including Baita Plai.

“The bonds provide the required capital to enable the company to bring its two core assets, Baita Plai in Romania and the diamond concession in Zimbabwe, into production,” said Andrew Prelea, Vast’s chief executive.

“The agreed non-conversion period, the early redemption and cash settlement options give us flexibility and enable us to limit dilution.”

Prelea added: “The Atlas facility will accelerate the start of production at Baita Plai while we continue to work on the establishment of a long term finance facility for Baita Plai and other assets in Romania, whether with the Swiss bank or otherwise.

“We are pleased to have established a new relationship with Atlas Capital Markets and look forward to working together.”

Last week the Minister of Mines and Mining Development unveiled a strategic roadmap for the mining sector, hinged on creating US$12 billion revenues by 2023.

Of course, thinking long-term is a welcome departure from the short-term focus that generally characterises all politics and for that, the Government must be commended.

If anything, the planning horizon needs to be longer to enable inter-generational transfer of wealth. These are the debates one would expect youths to pounce on, influence and shape with vigour, particularly as calls are growing louder for future generations to share in the economic prosperity that exploiting the nation’s natural resources creates.

It is glaringly obvious, however, that the plan will meet severe headwinds from inadequate infrastructure capacity (electricity, rail, water, roads), human capital shortages, cash/monetary policy challenges, lagging mining regulatory reforms, the negative impact of US/EU restrictive measures on attracting capital, among other issues.

On the balance of probability, therefore, the delivery of projects, the bulk of which are either at concept level or in early stages, could take longer to execute than the optimistic 2023 target.

That said, the emphasis of my critique is beyond internal challenges; rather, it questions the strategic shrewdness of the choice of minerals, given changing external global conditions.

The strategy clearly focuses on precious metals (gold and platinum), forecast to rake in US$7 billion. The plan targets 100 tonnes gold output by 2023, roughly treble the 34 tonnes mined in 2018, which was actually a historical record. On the surface, fundamentals for gold prices outlook look impressive.

Deeper analysis on the price drivers, however, reveals that gold price strength will be due to rising costs of mining and not demand driven. The strategy, meanwhile, implies Zimbabwe will gain global market share through trebling local output.

The trouble with gold is Zimbabwe does not have any absolute advantages over other nations as there are many other countries capable of increasing output. The battle will then centre on relative mining cost competitiveness. Clearly, the prospect of Zimbabwe aggressively gaining global gold market share within five years and at the expense of other countries look slim, given the context of the current investment climate.

The global gold market is fragmented and unlike the cobalt market, for example, where the DRC commands 60 percent of the global market, and can unilaterally influence global supply with little to no competition from other countries. Gold is even more complex.

In 2000, then UK Chancellor, Gordon Brown, released so much gold on the global market that prices were suppressed to as low as US$250/oz (current price approx. US$1 400/oz). Curiously, this coincided with the land reform programme and it did hurt the Zimbabwean economy. Surely, that must serve as warning that relying on gold is a very dangerous strategy.

The platinum sector, meanwhile, is set to be the biggest loser from the electric-vehicle revolution. Roughly 45 percent of global platinum consumption is for catalytic converters used in internal combustion                                                                               engines.

Some forecasts estimate that by 2030, 90 percent of new car sector sales will be electric vehicles. Even then, by 2022, the costs of manufacturing and running an electric vehicle are set to be cheaper than combustion engines. Several European and developed countries have already begun banning diesel engines from as early as 2030. Admittedly, the strategic outlook for platinum does not look promising.

Indeed, the strategic roadmap is conspicuously silent on the very fact that the future of the mineral sector will be mainly driven by three factors; technological advances, climate change reduction and the quest for geopolitical dominance.

Technologically, the so-called battery metals (cobalt, nickel and lithium), represent the best prospects for the future. Lithium is actually not that scarce, but Zimbabwe can do more to play a part and become one of the important players in the global industry from the onset.

Climate change is going to force the world to rethink consumer tastes. Light weighting of automobiles and even in buildings construction will take centre stage. The winners will be copper, aluminium and graphite (for composites).

In the quest for geopolitical dominance, one of the most important minerals at the moment are the rare earth elements. These are used to make powerful magnets and have massive applications in military equipment, electronic devices and satellites technology.

China currently controls over 90 percent of the market and even counts the US Department of Defence among its customers. No doubt then, that China is using its market dominance as a trump card in ongoing trade wars with the USA.

It took China around 20 years to build this dominance. Interestingly, China holds around a third of world deposits and Zimbabwe is thought among the top five countries in the world with economically viable deposits.

Rwanda again features as a great case study. In 2010, Rwanda opened mines for coltan (tantalum), widely used to make capacitors for mobile phones and electronic devices. Today it is the biggest producer with 25 percent of global supply followed by the DRC (20 percent of market).

In fact, roughly three quarters of the world’ coltan supply is newly mined — and by African countries. The dominance of African countries in this market could be even greater if supply chains are integrated internally, making use of various continental free trade agreements.

My bone of contention is that the current strategy implies mining the same old traditional minerals and continuing the same old tradition of exporting raw materials. This surely will be a recipe for continued exploitation of our resources with little benefit for future generations.

Evidently, what Zimbabwe actually needs is an integrated industrial strategy (as opposed to a mining strategy), which speaks to future world realities and then informs mining plans. That industrial strategy must be crafted with value addition of mined ores intrinsically integrated as China did with rare earth elements industry. Now that will be a real game changer!

Hopewell Mauwa is strategic analyst based in London. He writes in his personal capacity and can be contacted on [email protected] 

Business weekly

The menace caused by gangs of machete-wielding criminals infamously known as “MaShurugwi” took centre-stage at a high-level government meeting amid concerns that the miners were terrorising villagers, it has been learnt.

Artisanal mining was decriminalised a few years back as part of the government’s efforts to boost gold production. The yellow metal overtook tobacco as the country’s single largest foreign currency earner in 2018. Information gathered by this paper shows that there are sharp disagreements within government on how to control the activities of the miners who have been credited for boosting the gold output.

According to a well-placed source, “the Cabinet is divided over the matter after the potential threat to national security by these thugs was cited. One minister noted that these thugs only need someone to fund them and they can turn into a militia overnight. The issue of MaShurugwi or machete wars are highly associated with civil wars and these are the fears being raised by government officials now.”

It is also understood that state security agents have advised President Emmerson Mnangagwa that the machete-wielding artisanal miners who are terrorising gold mining towns around the country could soon become a state security threat.

Top spies, according to sources, have also advised President Mnangagwa to deal with the matter carefully. “The problem is that people only look at something as a political or security threat if it is targeting the President or deemed to potentially result in the overthrow of the government, but this is a huge threat which people don’t see,” said a source.

“These people are becoming too powerful and difficult to deal with because they have machetes. Imagine if they start using guns. It’s going to be difficult for anyone to deal with them and this could become some sort of a militia that is difficult to contain,” added the source.

Business Times has learned that the Joint Operations Command – which comprises senior officers from the military, police, intelligence service and prisons – in Mashonaland Central province met recently to discuss the matter.

Some police officers say they now fear for their lives as they cannot enforce the law against these bandits without putting themselves in danger. According to insiders, the Mashurugwis claim to be well connected to top ministers and securocrats who guarantee their immunity.

Zanu PF vehicles were last year stoned in the Shurugwi area by these rowdy groups during the ruling party’s campaign trail. Zanu PF leadership in the Mashonalad Central province this month had a meeting with villagers in the Mazowe area and at Jumbo mine.

It was a meeting to address the security matters in the province. In attendance were the police and other members of the security sector. The villagers made the claims earlier when an inter-ministerial task force visited the province to assess the scourge of illegal mining. Police officers and Zanu PF officials also attended the meeting.

The gangs are said to be behind a series of crimes in Mazowe and some are already serving various jail sentences for killings in the machete gold wars. The ministerial task force visited the Eureka Mine, a defunct gold mine that President Mnangagwa visited before last year’s elections, promising to open it and create hundreds of jobs.

Remigious Matangira, MP for Bindura South, who also attended the meeting confirmed the problems of the Mashurungwi, but blamed it on the security forces for failing to bring order in the province.

Army spokesperson Overson Mugwisi said while it was a matter for all security departments, so far it remained a police issue where people were being cut by knives. He said there was no need to deploy the army so far_Business Times