Mining ZimbabweLatest Mining News, Policy and Industry Updates

Zimbabwe’s coal producers are making a push to be partly paid in foreign currency by ZESA after the Reserve Bank of Zimbabwe (RBZ) recently directed the State-owned power utility to bill exporters in hard currency, an industry body has said.

Coal producers — Makomo Resources, Hwange Colliery Company and Zambezi Gas supplies about 90 percent of their output to Zesa’s four thermal power stations including Hwange, the country’s largest power plant after Kariba hydroelectric plant.

The power utility also owns three small power plants in Harare, Munyati and Bulawayo.

Recently, the central bank directed — through a Statutory Instrument — Zesa to bill exporters in foreign currency with the proceeds going towards importation of power, equipment and payment of foreign loans and foreign insurance premiums.

The RBZ said “Zesa shall be allowed to bill in United States dollars or the equivalent in Euro or any other currency for the supply of electricity to exporters, and partial exporters earning their revenue or receiving their income” in forex.

Chairman of Coal Producers Association Ray Mutokonyi told Business Weekly in an interview that foreign currency availability was critical in the electricity value chain and wants part of forex being earned by the power utility to also benefit the miners.

Forex shortages, fuel and electricity characterise Zimbabwe’s economic challenges.

The miners require foreign currency to procure production inputs and other consumables such as explosives, but have not been getting enough on the interbank market.

“Foreign currency availability is important to ensure enough production of coal for power

“Since ZESA is now being paid in foreign currency by exporters, as coal producers, we feel a portion should be put to production.

“We need foreign currency to import consumables, which is critical for our operations.

“Through the Chamber of Mines, we have done a paper to present this position to our parent ministry (Mines and Mining Development), the Reserve Bank, Energy and Power Development and Finance (and Economic Development Ministries.”

ZESA acting chief executive Engineer Patrick Chivaura said the forex received by the power utility had prescribed uses in terms of the law. “It would be difficult for ZESA to then apply same to local suppliers without breaking the provision of the Statutory Instrument,” said Eng Chivaura.

Mutokonyi however said by allowing ZESA to bill exporters in hard currency, the utility’s domestic currency revenue would substantially fall and this would in turn negatively affect its ability to pay for local services, including the coal supplies.

“What this has done is to take away local currency that has been financing local production (through coal payments) as exporter’s money will now go towards power imports.”

Already, ZESA owes coal miners nearly $108 million and this was compounding challenges to buy foreign currency on the interbank market. “ZESA is always behind (in terms of payments). “We have talked to the (executive) chairman Dr Sydney Gata and he has assured us that he will look into the matter,” said Mutokonyi.

Eng Chivaura confirmed the debt, but said half of the amount was due for payment. “Serious efforts are being made to pay as regularly as we can an on a weekly basis (and) payments will be sustained until the debt is cleared,” said Eng Chivaura.

Coal remains the dominant energy mineral for Zimbabwe. The country boasts of vast reserves of coal particularly in the north-west and southern parts of the country.

Coal intake at the power station will significantly increase when Zimbabwe Power Company, an electricity generating subsidiary of ZESA commissions additional two units by end of 2021. The units are expected to produce 600 megawatts.

The US$1 billion project, being implemented by Sino Hydro of China is 25 percent complete.

Recently, ZPC claimed inadequate supplies of coal by the miners was threating the country’s power generation and wanted to produce its own fuel for guaranteed supplies.

With the coming in of stage 7 and 8, ZPC said it was concerned that the existing miners might fail to adequately provide feed stock for the expanded power station.

Hwange thermal station is currently the base load power plant in light of declining production at Kariba Hydroelectric due to low water level at Lake Kariba.

The Zambezi River Authority, which manages the Zambezi water resources said the hydrological situation remains dire indicating a possible suspension of power generation by January. Zimbabwe and Zambia generate electricity from Lake Kariba_Business Weekly

TWO coal mining companies are set to commence production next year in Hwange, in a development likely to boost guaranteed coal supplies to Hwange thermal power plant.

Coal intake at the power station will significantly increase when Zimbabwe Power Company, an electricity generating subsidiary of Zesa Holdings commissions additional two units by end of 2021. The units are expected to produce 600 MW.

The US$1 billion project, being implemented by Sino Hydro of China is 25 percent complete.  Coal remains the dominant energy mineral for Zimbabwe. The country boasts of vast reserves of coal particularly in the north-west and southern parts of the country.

The new investments will also boost the country’s prospects of meeting mining revenue targets under the US$12 billion mining roadmap recently launched by President Mnangagwa, of which the coal sector is expected to contribute US$1 billion.

Presently, three companies—Hwange Colliery Company, the country’s oldest coal mine, Makomo Resources and Zambezi Gas are operating in the Hwange district.

The companies supply 90 percent of coal requirements to Hwange thermal plant. With industrial capacity remaining subdued, ZPC remains the major consumer.

Chilota Colliery is expected to start production in the first quarter of next year while Western Coal has just completed exploration and is now seeking relevant approvals. It intends to start full scale production during the second half of the year.

Chilota director Mr David Zou told Business Weekly yesterday his company was looking at an initial investment of US$12 million, beginning with a monthly production of 50 000 tonnes and gradually ramp it up to 100 000 tonnes by year end.

On average, the existing coal miners are producing about 220 000 tonnes per month.

“We will be doing open cast mining and right now, the equipment is arriving,” said Mr Zou. Western Coal mine manager Mr Jacques Viljoren said the company was looking at an investment of between US$20 and US$30 million, initially starting as an open cast mine for the first six years before going underground. “We have finished exploration and we are now moving to bulk sampling for analysis,” said Mr Viljoren.

Western Coal’s special grant is owned by businessman Billy Rautenbach. Both companies say the largest portion of their production will be delivered to the power plant.

Coal Producers Association chairman Mr Ray Mutokonyi said the coming on of Western Coal and Chilota Colliery was critical for sustainable generation of thermal power.

Recently, ZPC claimed inadequate supplies of coal by the miners was threating the country’s power generation and wanted to produce its own coal for guaranteed supplies.

With the coming in of stage 7 and 8, ZPC said it was concerned that the existing miners might fail to adequately provide feed stock for the expanded power station.

Apart from Hwange, ZPC also operates three small power plants in Harare, Munyati and Bulawayo.

In the past few years, the Government granted 28 special grants to prospective coal miners, but only three were being utilized. Government has persistently indicated that it will repossess unproductive mining claims to pave way for new players_Business Weekly

Zimbabwe’s mineral exports, excluding gold and silver exports, are projected to climb 6 percent above prior year earnings to over US$1,8 billion after sales topped US$1,6 billion for the 10 months’ period to October this year.

But the outlook for gold production is not encouraging amid expectations the country will miss the 2019 target weighed down by regulatory concerns (low forex retention levels and price issues) and effects of crippling power shortages.

Gold, which accounts for over half Zimbabwe’s mineral exports and mining in general, are key sources of foreign exchange for Zimbabwe other than tobacco, which over the past decade or so brought about a billion US dollars annually.

It is expected Zimbabwe might earn much less from tobacco in 2020 amid significant apathy by farmers on account of incoherent policies (forex retentions and sub-economic prices), which have seen many farmers quitting the crop.

However, analysts and the Minerals Marketing Corporation of Zimbabwe (MMCZ) expect mineral export earnings to be significantly higher compared to last year on account of a stellar performance in the first 10 months of this year.

MMCZ general manager Tongai Muzenda said the country’s mineral marketing authority was confident that mineral sales would be higher this year on account of several factors, including favourable prices for some minerals.

“We are a projecting a 9 percent increase and this can be attributed to an increase in prices particularly of PGMs. Then there is also beneficiation (factor) after Unki established a smelter and contribution from ferrochrome production,” he said.

In the 10 months to October, PGMs continued to dominate export earnings having accounted for about US$1 billion of the total inflows.

Zimbabwe PGM earnings come from PGM concentrates and PGM mate exported by its three current active producers — Zimplats, Unki and Mimosa, who contribute in that order, in terms of tonnage and value.

The other significant contribution to exports in the period under review came from diamonds sales, which totalled US$142 million.

Another metal of interest was high carbon ferrochrome, which earned US$254 million.

Despite the recorded increase in minerals for the 10 months, compared to last year, the haul however fell 11 percent below set target of US$1, 79 billion which the state marketer attributed to depressed PGM prices.

Economic analysts expect economic headwinds to persist while further constrictions of foreign currency would cause significant currency devaluation as exports will decline unless the country can produce high value add exports.

Mining is Zimbabwe’s biggest foreign currency earner and accounts for over 60 percent of the country’s foreign currency earnings. The sector is also estimated to account for between 4 and 12 percent of gross domestic product.

This comes, surprisingly, as October became the first month in 2019 that bullion deliveries outweighed last year’s production on a month on month comparison as gold deliveries increased 17 percent to 2,4 tonnes.

Analysts attributed the increase in gold production in September to increased fuel allocations and growth in drawdowns of the Gold Development Initiative to spur production of the country’s biggest export.

Although the Mining Business Confidence Index (MBCI) forecast a positive outlook for the sector in 2020 Zimbabwe is this year expected to miss its target of a 40 tonne gold output after hauling a record 34 tonnes last year.

“The country is likely to miss the 40-tonne gold target due to persisting economic challenges including regulatory uncertainty and debilitating power cuts lasting up to 18-hours,” financial analysts IH securities said.

Zimbabwe, which is targeting to grow mineral exports to US$12 billion by 2023 and middle income status by 2030, has significant mineral export potential, as the country is home to over 40 known mineral occurrences. It also has the world’s second largest known deposits of platinum, one of several precious minerals resident in the country that include diamond, gold and emeralds. Other key minerals include chrome, nickel, coal and lithium.

However, Mines and Mining Development Minister Winston Chitando says less than 10 of the country’s key minerals are commercially exploited with the bulk of the minerals waiting to be hauled from under the earth-Business Weekly

An employee of a registered Bulawayo gold buyer cheated death after a six-man gang armed with an AK rifle shot him on both legs and got away with US$4 000 and more than R12 000. 

Mr  Brian Gavanga was attacked by the gang that was travelling in a silver Honda Fit vehicle without vehicle registration plates at his place of work in Pumula South suburb. 

The robbers are still at large and Mr Gavanga is admitted to Mater Dei Hospital.

Another employee, Mr Lawrence Mazhinje had received a call from a regular client identified as Mahlawulo Moyo, who has since been arrested. The business is run from the gold buyer, Mr Lovemore Sibanda’s house in Pumula South. 

Bulawayo Police spokesperson Chief Inspector Precious Simango confirmed the robbery yesterday.

“I can confirm that we are dealing with a robbery that took place in Pumula South suburb where one male adult was shot. Investigations are underway. The complainant is Lovemore Sibanda, a male aged 55 of Pumula South, Bulawayo, a registered gold buyer. The accused persons are six unknown male adults who are still at large,” said Chief Inspector Simango. 

She said Mr Gavanga was rushed to Mater Dei hospital following the shooting. 

Chief Insp Simango said Gavanga had opened the gate, assuming that the regular client had arrived, only to be met by the gang of robbers in the Honda Fit. 

“ Five unknown male adults, armed with an AK rifle, machete and an axe, disembarked from an unregistered grey-silver Honda fit and entered the yard. One  of the suspects shot Brian Gavanga on the left and right ankle and demanded money and gold from him. The accused forced Gavanga into the room where Lawrence Mazhinje was and demanded more money from him,” said Chief Insp Simango.

Following the arrest of Moyo seven grammes of gold were recovered from him_The Chronicle