Mining ZimbabweLatest Mining News, Policy and Industry Updates

Zimbabwe Stock Exchange listed nickel miner, Bindura Nickel Corporation, has posted a 136 percent increase in profit after tax to US$6,6 million for the half year period to September 30, 2019 from US$2,8 million the same period in 2018.

In a statement accompanying the financial results for the period, group chairman Muchadeyi Ashton Masunda, indicated the positive movement in profits emanated from “exchange gains and a decrease in the cost of sales which in turn, was attributable to the ongoing efforts to contain costs as demonstrated by the decrease in cash costs, year on year.”

Growth in profit after tax also seem to have been impacted by a significant 1 percent increase in average nickel price to US$9 052 per tonne from US$9 001 per tonne in prior year comparative.

On a general note, however, the prices “remained subdued into the year due to weak stainless steel demand, overstocking and the lack of real demand in class 1 nickel in the automotive industry.”

The remarkable movement in average nickel price had, in turn, translated to an 8 percent boost in revenue for the period to US$28,3 million from a comparative figure of US$26,2 million.

This boost in turnover had resulted in the group recording a 47 percent increase in gross profit to US$12 million against US$8,2 million in prior year comparative.

Profit growth was further a result of an increase in the tonnage of nickel concentrate sold to 3 002 tonnes against 2 980 tonnes in 2018. This was despite a 4 percent decrease in nickel production to 2 943 tonnes from a commendable tonnage of 3 076 tonnes in prior year comparative. The decline, according to Masunda, was “in line with the lower ore grade achieved, year on year.”

Ore mined during the period under review was 215 338 tonnes while ore milled was 215 728 tonnes.

Head grade at 1,34 percent was lower than the year-end of 1,64 percent, reflecting “the mining mix whereby more of disseminated ore was mined than the massives. Recovery was 86,1 percent compared to 86,3 percent achieved as at 31 March 2019.”

With a boost in profits, total equity also soared by 11 percent to US$66,1 million from US$59,5 million as at 31 March 2019. Current assets increased by 33 percent to US$29,3 million from prior US$22,1 million, reportedly due to “an increase in trade and other receivables.”

Meanwhile, Bindura Nickel projects gobbled a total US$3 million during the period under review. Of the total, shaft re-deepening took US$1,2 million while New LHDs and New Dumb Trucks cost US$0,7 million each. The Smelter Restart Project is reportedly still stationed at 83 percent complete while the Refinery and Shangani Mine, as usual, remain under care and maintenance. Going forward, the company places hope of an improvement in nickel prices in global dynamics.

Masunda indicated that prices given a boost above US$18 000 per tonne after the Indonesian government announced that it would bring forward the raw ore exports ban to 1 January 2020 from 1 January 2022.

India supplies 12 percent of the global nickel and its withdrawal of raw ore exports will effect a movement in prices. Phillipines, another global supplier expected to fill the void, reportedly produces low grade ore.

As with other businesses, Bindura Nickel also banks on the fruition of the ongoing United States of America / China trade talks. The talks have been disturbed by the recent Hong Kong  unrest.

“Nickel demand is expected to remain high, with a projected average growth in excess of 4 percent per annum year on year. Stainless steel will remain the main consumer of nickel and is expected to average 67 percent while the use of Nickel in the production of electric vehicles is expected to increase to 18 percent by 2025,” and here lies Bindura’s growth prospects_Business Weekly

The Zimbabwe Iron and Steel Company board has resolved to terminate the controversial takeover deal of some of the firm’s key assets by ZimCoke, an investment vehicle fronted by businessman Eddie Cross on suspicion the transaction was flawed, Business Weekly can exclusively reveal.

ZimCoke bought Zisco assets related to the production of coke on the understanding that when the steel plant is revived, it will get its coke needs from ZimCoke.

Zisco stopped operations in 2008, plagued by a lack of capital to recapitalise and mismanagement. With its furnaces having the capacity to produce up to one million tonnes of steel per year, the company was among the country’s major foreign currency earners.

According to Cross, the ZimCoke deal, valued at US$225 million was signed in July 2017, when Dr. Mike Bimha was Industry and Commerce Minister. It was given final approval by Cabinet on May 4 this year and the transfer of the assets was signed a month later.

The transaction was a debt/asset swap involving Zisco assets and Zisco steel debt owed to the German bank KfW GMBH in Frankfurt. Cross claims that the Zisco debt was valued, at the time of the transaction, at US$225 million but will exceed US$350 million by the time the debt is expunged by payments from ZimCoke.

Several people with the knowledge of the deal, however, revealed to Business Weekly that the Zisco board resolved to terminate the deal citing serious corporate governance inadequacies since the arrangement was entered into without the knowledge of the former board, led by former CBZ Holdings chief executive Nyasha Makuvise.

However, Makuvise could not be reached on his phone yesterday.

It is also alleged that the legal team at the Ministry of Industry and Commerce was not involved in crafting the contract as “Bimha personally handled the transaction.”

The sources said there was no proper due diligence conducted prior to the sale of the assets, while no professional evaluation was done to ascertain the debt to the Germany bank.

This comes at a time when R&F, the Chinese investor, which was looking at acquiring a shareholding in Zisco recently advised the Government that it was pulling out.

The collapse of the R&F deal became the third after similar transactions involving Indian firms, Global Steel Holdings, and Essar Holdings, failed in 2006 and 2015 respectively.

R&F had agreed to acquire Zisco’s majority shareholding to pave way for resuscitation of its Redcliff-based integrated steelworks plant at a cost of about US$1 billion.

“The governance procedures were flawed as the Zisco board was not involved in this ZimCoke transaction. The board has the fiduciary role to protect the assets of the company and this alone makes the whole transaction flawed,” said one source who requested not to be named because is not authorised to talk to the media.

“After reviewing the deal, the new board established that about 20 key items including the rail tracks, gas cylinders, coke oven battery, and conveyor belts had been taken over.

“Zisco is an integrated plant…it’s a system and stripping it off some of its components is tantamount to incapacitate the company. Coke oven is the most important asset of Zisco so technically, Cross and his guys had literally taken over the company.”

While Cross said there was an undertaking that when the steel plant is revived, Zisco will get its coke needs from ZimCoke, sources said there was no clause in the agreement that ZimCoke will prioritise coke supplies once the steel plant is revived.

Another source said the fact that due process was not done since the board was not involved, it was clear corporate governance procedures were flouted, thus making the deal null and void.

“Economically, Zisco is an integrated steel industry, which cannot do without coking ovens and as such to take over the ovens is as good as incapacitating Zisco,” another source said. “ZimCoke has over and above to the coking oven taken vast assets of Zisco which ranges from railway line, conveyor belt, library, slag, houses which has nothing to do with the coking ovens. This is not an investment but asset stripping.

“It is clear the intention of ZimCoke is beyond operationalising coking ovens but taking over Zisco.”

Zisco acting chairman Dr. Gift Mugano, declined to disclose details on the deal and simply said his board would issue a comprehensive comment at an appropriate time.

“We have a lot of issues that we are dealing with so at this stage it will be premature to comment on the affairs at Zisco. We will do so at the right time.”

However, Cross defended the deal, saying it was the first full privatisation of a State asset under policies adopted by the new administration in line with state enterprises reforms.

“The plant is completely derelict and has not operated for over 12 years,” said Cross. “Zisco itself remains heavily in debt and has also not functioned since 2008. It has no capacity to raise the funds to settle its own obligations or to rebuild the plant.

“The shareholders in ZimCoke are going to invest over US$500 million to get the coke plant back into operating condition. In addition, the company will have to invest in clean water supplies, power generation, railways, and Hwange Colliery.

“None of which are able at present to meet the needs of the plant. When this investment programme is complete, ZimCoke will be the largest industrial exporter from Zimbabwe.”

Cross said the rebuilding of the coke oven plant was the first stage of the long process of resuscitating Zisco. “The plant cannot function without coke and ZimCoke will make the restart of steelmaking that much easier than if the project had not been initiated. Clearly, both companies will have to work closely together to achieve that and the directors are well aware of the obligations,” he said.

Asked what role ZimCoke would have in deciding the investor for Zisco given that the company already owns part of the company’s key assets, Cross said: “No role whatsoever – that is up to the Government of Zimbabwe and the Zisco Steel board of directors. We would, however, ask to be consulted if that was possible.”

Cross said the subdivision of the plant was complete and was awaiting transfer of assets by year-end. This would enable “us to secure financial closure and to start the rebuild.”Business Weekly

The government has opened up the Gwayi Coal-Electricity Integration Project to new investors amid revelations that the Chinese investor, the Yunnan Linkun Investment Group, has failed to move funds from China because of an unpaid Sinosure debt.

The project, China Africa Sunlight (CASECO), is a joint venture between the Ministry of Defence’s Old Stone Investments and Yunnan Linkun. The joint venture has failed to take off since 2015 due to an unpaid US$60m Sinosure debt by the Chinese government.

Sinosure is a state-funded policy-oriented insurance company established and supported by the Chinese government to promote foreign economic and trade development and cooperation.

The failure by the Chinese investor to move funds from the China Import and Export Bank (China Exim) left Zimbabwe with no option but to look for alternative funders who have no problems in moving funds to Zimbabwe.

A new investor will make it a three-shareholder agreement, which will mean a dilution or a complete exit of the Chinese investor from the deal. Four investors of Middle Eastern, African, and Australian origins have since been identified, Business Times was told.

The head of the Ministry of Defence’s Department of Economic Development, Brigadier General Chris Mupande, told Business Times that the project had had challenges but current efforts would bring it to fruition. The project requires about US$2bn to take off.

“The current Chinese investor has failed to move funds from Chinese banks because they need insurance from Sinosure. That means we have had to look for other alternative investors,” Mupande said.

“So the government is in discussions with four potential investors and this means we are likely to have three shareholders on the project or a dilution. But the arrangement at the moment is to make sure the project takes off, considering the potential that it possesses.

“There are many possibilities around this project considering that there is coal mining to be done, together with coal-bed methane gas. This project is the future of Zimbabwe as it is an integrated project on both power generation and mining.”

Mupande said the CASECO project would culminate in the construction of multi-million dollar cement and fertiliser manufacturing facilities, which would bring a dramatic change in the Gwayi landscape.

The coming in of Yunnan Linkun followed the termination of a joint venture between Old Stone Investments, local shareholders in the China Africa Sunlight, and Shandong Taishan Sunlight Investment Company Limited, the initial partners in the project.

Shandong Taishan, which was supposed to mobilise the funding needed for the project, has failed to raise the money, resulting in the termination of the joint venture.

The project, already granted National Project Status by the government, will result in the setting up of coal mines and the construction of a 600MW thermal power station.

Zimbabwe is currently grappling with severe power shortages worsened by significant reduction in generation capacity at the country’s two main power stations, Kariba and Hwange.

Low water levels at Kariba have seen capacity dropping to around 200MW, while production at Hwange Thermal Power Station, the largest in the country, has also declined due to recurrent breakdowns_Business Times

Miners are demanding that the government should reduce diamond royalties to around 7.5% to encourage them to produce more to meet the government’s target of US$12bn mining revenue by 2023.

This is after Finance Minister Mthuli Ncube recently reduced diamond royalties from 15% to 10% effective from January 1 2020. It also comes at a time when the mining sector is reeling with foreign currency and electricity shortages, the lack of top-quality machinery, and low forex retention levels.

RioZim chief executive Bhekinkosi Nkomo told Business Times that Zimbabwe would struggle to reach the US$12bn target by 2023 if it continued with too many taxes and levies in the mining sector as they affected serious investments in the extractive sector.

“Zimbabwe has the highest royalties share in the region with 15% and once you factor in that 15%, your net present value for any project becomes negative,” Nkomo said.

“If we put our royalties at a range of between 5% and 7.5%, the industry becomes more attractive. The second highest country in the region is at 10%, which means we are way ahead of others which is not good for investment,” Nkomo added.

Mining contributes 65% of the country’s export earnings, with gold contributing 38% of overall exports.

According to Nkomo: “The mining industry has over 20 pieces of legislation that regulate it and all of them have a long list of charges, inspection, and rentals, leaving most mining companies in the red.

That issue needs to be looked into very seriously. We need to consolidate those charges and we have done a lot of appraisals for the projects, especially in the diamond sector.”

He said there was also a myth that if taxes were reduced, revenues would also go down. This, he said, was wrong because if the authorities “charge 15% of US$100, that’s US$15, but if they reduce the tax to 10%, the government will get more money in the process”.

The mining sector has suffered due to crippling power outages which escalated in June this year. Nkomo said there was a need to spend more time to de-risk the country as far as electricity availability was concerned.

Despite mining companies ringfencing themselves from power outages by paying their bills in forex, Zesa Holdings still fails to provide them with power. This is costing the country millions of dollars in revenue as mining companies have been forced to work four days a week.

“Investors don’t come into a country so easily, they need to look at the risk they will carry and whether they will get a return or not, and when there is no electricity, it means there is a big deterrent,” Nkomo said.

The Chamber of Mines of Zimbabwe said besides royalties, duties should also be competitive and red tape cut to improve the ease of doing business.

Currently, it takes two to three months to apply for a project status document, and by the time the application goes through the miner would have lost a quarter of the year. Industry experts say all miners, big or small, need more incentives to attract investment in the country_Business Times

The Ministry of Mines and Mineral Development is readying itself to adopt the Extractive Industry Transparency Initiative (EITI) by setting up a mining cadastre office, an official has said.

Repeated calls have been made by the new government that Zimbabwe is now open for business, what opportunities and challenges does this policy direction mean to ASGM sector?

Ennocent Murapah, Human Resources Officer in the Ministry of Mines made these remarks while addressing a Public Finance Management indaba organized by Zimbabwe Coalition on Debt and Development (ZIMCODD) recently.

Murapah said government pressed upon by civil society, is in the process of setting up cadastre offices at all levels to develop a comprehensive structure which can then put the country on a better position to join the EITI and curb illicit financial flows rampant in the sector.

He said despite political resistance government has forged ahead with setting up structures for cadastre officers as well as a Director of the cadastre office, to enhance transparency in the sector.

“The whole issue of ETI surrounds the secrecy that was on the issue of mining claims that’s why the EITI has been raised by civic society as a solution, and as government we have acceded that this is the position that we are perceived from.

“The whole concept met a lot of resistance because of transparency that it brings to the mining sector, most people do not want to be known who is doing what and how in the mining sector.

“We are now currently implementing reforms on the structure side of the issue of EITI, which was the missing link even if we were going to implement, we needed that structure to ensure that we are able to implement it fully.

“Fortunately for us we have currently set up a post of Director in terms of cadastre, we used not to have that portfolio, and it speaks to the aspects of implementation, over years we have faced challenges in implementing the cadastre system.

“The aspect of structure has been cascaded down to provinces, we now have cadastre officers and technicians to make sure that we can implement the cadastre system,” said Murapah

Tafadzwa Chikumbu, ZIMCODD Socio-Economic Analyst said the government does not have any motivation to implement reforms as the mining sector thrives in secrecy.

He said delays in implementing amendments to the Mines and Minerals Development Bill, stretching over ve years, betray the lack of political will to reform the mining sector.

“There is no motivation on the part of the government to make reforms which promote transparency in the mining sector, because traditionally this a sector that thrives in secrecy.

“We have gone for ve years with the Mines and Mineral Bill in the state of being a mere bill because the extractive industry or mining sector is one sector that thrives in secrecy, where information is not shared, that’s its nature.

“Natural resources are political, and for Zimbabwe, we say let’s have a Mines and Minerals Act first because the commitment was made, the policy was drafted in the new form but its failing to see the light of the day,” said Chikumbu.

He added, “It’s because of the nature of the sector that we are dealing with, and we could go another year without the signing of the EITI.”

263 Chat

THE introduction of the new currency has proven to be what not the doctor ordered to serve as panacea for the cash crisis.

This can be evidenced with events where ordinary citizens in the country continue to face the daunting challenge to access the cash from banks.

A snap survey carried out by Zim Morning Post in the capital indicated that ordinary citizen are still struggling to get cash from their banks.

Long winding queues remain permanent features outside banks as citizens struggle to access their funds, which are quickly eroded by the run-away inflation.

The Government set a maximum withdrawal of ZWL 100 which is elusive but interestingly cash barons are seen selling hordes of hard cash.

Speaking to Zim Morning Post Business this week, an elderly woman Sheila Chihota (78), who hails from  Chihota village, said she came to Harare to collect her monthly pension which she is struggling to get and is spending nights sleeping at outside the bank albeit without luck.

“I have been here for the past three days and three nights hoping to get my pension which I worked for but nothing tangible is coming from the management.

“What pains me most is that we see people selling cash in the streets and we do not know where they are getting the cash from, if I want to buy cash from the streets I will be left with nothing since my pension is already peanuts, ” Chihota lamented.

Chihota called the government to address the issue of cash crisis and deal with cash barons who are making life difficult for ordinary citizens

“The government should deal with those who are selling cash, where are they getting money to sell while we can’t get money which we have worked for the leaders should deal with this cash crisis as a matter of emergency, ” added Chihota

The question that lingers with no answer is the cause of the cash crisis.

Is it because of bank panics, stock market crashes, bursting of other financial bubbles, currency crises, sovereign defaults or otherwise? One can say, the cash crisis in Zimbabwe is the crisis of discipline and confidence in the economy as a whole.

Speculation in the market is also rife with the richer getting richer, and the poor getting poorer.

Chihota told Zim Morning Post that she has lost confidence in the Zimbabwe banking sector.

” I just want my money, I have lost trust and faith in our local banks they take us for a ride, “ added Chihota.

Economist Kudakwashe Machere said the government should dollarise so as to ease the cash challenge rather than doing things they know they won’t bring any meaningful result.

“Introducing new currency when people do not have faith in the banking sector is trying to plant tobacco in a desert, you will not get any result, ” said Machere.

Zimbabwe has been facing cash crisis since the turn of the new millennium and the situation got easy during the time of inclusive government.

The crisis was to later haunt the government and in 2016 when the late former  President Robert Mugabe through Reserve Bank Governor John Panonetsa Mangudya introduced the bond notes.

This surrogate currency was pegged at a value at par with the United States Dollar.

Zim morning post

HARARE – Expansion work at Hwange thermal power station now stands at 25 percent, 14 months into the project which will add 600 megawatts into the national grid by 2022.

The $1.5 billion project, being carried out by Chinese firm Sino Hydro,  entails the addition of two power generating units, unit 7 and 8 to the existing 6 units that were commissioned between 1983 and 1987.

Along with many others at various stages of implementation, the project is part of Zimbabwe’s efforts to find sustainable solutions to power shortages that are retarding industrial growth and bedeviling the economy at large.

In an update, the Zimbabwe Power Company (ZPC) said most excavation work had been completed including for the cooling tower, the boiler house, and the chimney.

“We have completed all the excavations up to foundation level for  Hwange 7 and 8,” the ZPC said.

“As of this month of November, we have done fourteen months into our schedule. Our current progress we are around 25 percent and we are on  target in terms of what we had planned to achieve up to month 14, we are  currently on schedule.”

The whole project will take up to 42 months to complete, but unit 7 is expected to start firing by April 2021 while unit 8 would follow later on.

Hwange Power Station is Zimbabwe’s largest coal-fired power generator with production capacity of 920 MW.

But because of old age, the plant’s current dependable capacity is around 600 megawatts.

In addition to the Kariba South Hydropower Extension Project, which was completed in March 2018, the Hwange expansion project is expected to substantially add to the national power grid and lift the nation out of the current power woes.

Zimbabweans are having to endure long hours of load shedding every day due to depressed generation capacity and limited ability to import power from regional neighbours. – New Ziana