Moving with the US$12 Billion target
Late last year, the president of Zimbabwe Emmerson Dambudzo Mnangagwa unveiled the US$12 billion road map with aims to developing the mining sector in Zimbabwe to a US$12 billion industry by 2023. However, mining performance in 2020 has left a lot to be asked when it comes to the attainment of the vision.
Rudairo Dickson Mapuranga
The mining sector is already Zimbabwe’s biggest foreign currency earner. Experts and the government are of the view that the sector is the leading horse towards the revival of the economy.
The President’s US$12 billion roadmap, has put a target of US$4 billion for gold producers while platinum and diamonds will weigh in US$3 billion and US$1 billion, respectively. Chrome, Nickel, and Steel are expected to generate US$1 billion, coal and hydrocarbons are also expected to produce US$ 1 billion. Lithium at the moment is expected to produce US$0.5 billion while other minerals are forecast to produce US$1.5.
For the government to achieve the President’s vision of turning the mining industry to fetch US$12 billion annually by 2023, exploration and reopening of closed mines should be at the epicentre of increasing the country’s mineral production.
However, very little has been done in 2020 in making sure that old mines are functional, at the same time the government has not been transparent on exploration investments happening in the country.
The Minister of Finance and economic development Prof Mthuli Ncube last year allocated $293.2 towards exploration to promote the Mining sector, however, many geologists in the country mocked the minister for investing very little in exploration. Zimbabwe, therefore, remains hamstrung by lack of exploration.
However, announcing the 2021 National budget the Finance Minister allocated US$1,4 BILLION to the mining sector with much of it expected to be channelled towards mineral exploration.
Gold performance in 2020
Fidelity Printers and Refiners (FPR) the country’s sole gold buyer and exporter had projected gold output to reach 35 tonnes this year owing to increase in fuel allocation to miners, however, by the end of October only 16.12 tonnes were delivered.
With two months to year-end, FPR now expects deliveries to reach 18 tonnes, the lowest national output since 2015. Last year, miners delivered 27.6 tonnes, reflecting a 35 per cent decline.
The country’s bullion export receipts also retreated 23 per cent to US$697 million in the first 10 months of this year from US$906.7 million earned during the same period last year.
Gold performance in 2020 should be a wake-up call to the President towards the attainment of the US$4 BILLION gold industry by 2023, according to the statistics this year, it will be very difficult for the sector to realize a billion-dollars.
For the gold sector to achieve the US$4 billion mark, the government would need to address various factors affecting gold production and deliveries to the country’s sole gold buyer and exporter.
What needs to be done?
Curb Gold smuggling
International Crisis Group (ICG) reportedly indicated that Zimbabwe is losing $1.5 billion of gold through smuggling, Home Affairs Minister Kazembe Kazembe had earlier said that the country was losing US$100 MILLION worth of gold every month due to smuggling.
The country’s centralized gold buying scheme which underpays producers is largely to blame because it encourages smuggling and erodes industrial mining profits. Payments to small-scale and artisanal miners are very low pushing them to look for more lucrative markets.
The government, therefore, needs to employ measures that discourage smuggling of gold in order for the sector to realize the President’s target.
(b) Invest in gold mining
The reopening of viable closed mining assets, ramping up of production in all existing mines, opening new mines as well as value addition and beneficiation is essential for the sector to achieve the US$12 BILLION mark.
The government through the open for business mantra is pushing for the mining industry to attract investors both local and foreign promoting the President’s vision for Zimbabwe becoming an upper-middle-income earner by 2030.
(c) Invest in exploration
Zimbabwe is limited by a lack of exploration. Identifying new mines in the mining sector is key, the government should therefore make it their duty to invest in exploration through granting as many EPOs as possible to various Exploration companies. However, those have to be closely monitored to avoid closing down of areas like what has happened in Matebeleland with the land just lying idle
Reports have it that the government has granted EPOs Nicodemously with no activities showing that indeed the country is being explored.
PGM performance in 2020
Zimbabwe hosts the second-largest platinum group metals (PGMs) resource in the world. An estimate of 2.8 billion tonnes PGM ore at 4g/t 4e are estimated to lounge on the Dyke. The grade and thickness of ore body persist over large areas.
Platinum performance in 2020 was encouraging with the country’s largest platinum producer, Zimplats recording 81 percent profits during the final year 2020.
Despite the threatening of the Covid-19 pandemic to many businesses in the world, The Platinum mines operations were not affected by the pandemic as all the mines and the processing plants continued operating throughout the year with no confirmed cases within the workforce except for a few who tested positive at Unki Mine in Shurugwi.
Unki Mines a subsidiary of the Anglo-American Platinum which is Zimbabwe’s second-largest PGM producer increased production by 14 per cent in the quarter ended 30 September 2020 compared to the comparable quarter in 2019.
The increase in PGM production could be further be advantaged by the new operations in Great Dyke Investments’ Darwendale mine which is expected to become Zimbabwe’s leading Platinum Producer by 2023.
However, data released by ZimStats in August show that platinum was urged by diamonds in export sales with diamond ranking US$71 MILLION during the first 8 months of the year while platinum realizing US$66 MILLION excluding other PGM during the same period.
Diamond performances in 2020
Due to the effects of the pandemic, diamonds sale worldwide declined rapidly. Zimbabwe exported diamonds worth $71 million between January and August this year. Diamonds only edged platinum, which earned Zimbabwe $66 million during the same period. This is despite the fact that the diamond mining companies such as the Zimbabwe Consolidated Diamond Company (ZCDC) and Anjin continued operating during the lockdown. However, due to continuous production, Zimbabwe most likely had a surplus stock of rough diamonds without an obvious market to sell to.
Due to the decline in the diamond marketing world due to the pandemic, Minister of Finance and Economic Development Prof Mthuli Ncube announced that the government was going to promote value addition and beneficiation of diamonds through local diamond polishers and jewellers. As the demand and price for diamonds on the international market have slowed down due to the coronavirus pandemic, the solution to a global reduction in prices lies within the country’s policies. All along, Zimbabwe’s policies have been outward-looking, but the pandemic impels the country to craft policies that focus on the internal value addition of diamonds.
The diamond sector performance can further improve to reach the US$1 BILLION target by 2023 through producing 10 million carats a year, however, its performance this year leaves a lot to be desired.
The Minerals and Marketing Corporation of Zimbabwe (MMCZ) managing director Tongai Muzenda said then that they were expecting to rake in up to $100 million from the sale of the diamond stockpile.
Zimbabwe produced 2.1 million carats last year valued at $141.1 million or $67.09 per carat, according to data released by the Kimberley Process earlier this year.
Zimbabwe in the Marange field has the largest diamond field in the world in terms of carats produced, estimated to have produced 16,9 million carats in 2013 that is about 13 per cent of the global rough diamond supply. However, the diamond production at Marange is estimated at under USD 60 per carat while some diamond mines in the world produce rough diamonds valued at over USD 1000 per carat.
Zimbabwe has other diamond reserves in Masvingo, that is Chivi, Beitbridge, Mwenezi, and Mazvihwa in Zvishavane where the diamond miner RioZim’s Murowa diamond is the miner, Murowa diamond at its Mazvihwa reserves has a record high of 740,244 carats in 2018.
Chrome, Nickel, and Steel performance in 2020
Nickel mattes and Chrome performed significantly by August 2020 raking US$605 MILLION and US$88 MILLION respectively.
Zimbabwe has the second-largest high-grade chromium ores in the world after South Africa with reserves of approximately 10 billion tonnes. The country has more untapped than tapped Nickel deposits.
Steel production can reach the target in this category if plans are in place to revive the sector.
The government also need to address issues of predatory chrome pricing to generate more interest and also for miners to invest in the sector.
Lithium performance in 2020
Zimbabwe is the world’s fifth-largest producer of lithium, albeit, with only a single producing mine, the country has the potential to produce 20 percent of the world’s total lithium.
The environment in Zimbabwe is not appropriate for lithium projects development, due to poor governance Zimbabwe is in an economic crisis.
On paper, Zimbabwe has the potential to earn over a billion in lithium sales especially when the world is putting a focus on clean energy especially in vehicles.
The government has projected lithium to earn US$0.5 BILLION by 2023.
Other minerals performance
The government is expecting minerals other than the above mentioned to earn US$1.5 in export sales by 2023.
The coloured gemstone industry in Zimbabwe has been tipped to earn over a billion in export sales but very little has been done to make sure that the potential of the industry to economic revival has been recognised. The performance of the sector in 2020 has somehow been disappointing with MMCZ which is responsible for the marketing of the stones not ready to ensure that a vigorous marketing strategy has been met.
Zimbabwe has one of the largest copper and cobalt reserves in the world and experts believe that Zimbabwe can earn as much as Zambia through its minerals, however, no efforts are done to attract investments in the sector. Copper and Cobalt can be of significance in achieving the US$12 BILLION target.
What is needed to achieve the US$12 BILLION mark?
Mining Zimbabwe still recommends the government of Zimbabwe to adopt the following 10 points to make sure that the mining sector moves towards the US$12 billion industry by 2023.
End corruption – Although not muchly recorded corruption in the sector is too prevalent and the cancer of corruption needs to be dealt with once and for all. To end corruption, the government will be to create and adopt a digital cadastral system that increases transparency.
(ii) Institutionalise the rule of law to end statutory risk – there should be no changes to rules and regulations without stakeholder consultations and advance notice.
(iii) Stable economic environment – A stable economy where property rights are respected and policy is consistent will help stabilize the mining sector, thereby leading to the growth of the sector by attracting the right investment.
(iv) Currency must be free-floating and tradable – A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies. This is in contrast to a fixed exchange rate, in which the government entirely or predominantly determines the rate.
(v) Economic growth – Capital Flows Foreign capital tends to flow into countries that have strong governments, dynamic economies, and stable currencies, therefore, Zimbabwe needs to have a relatively stable currency to Attract investment capital from foreign investors.
(vi) Absolute minimal restrictions on lines of communication, especially the internet – The government of Zimbabwe reportedly lost millions of dollars through delayed Revenue inflows due to the slow processing of imports and exports after the switching off internet services countrywide early last year.
(vii) Improve geoscientific knowledge by revamping and recapitalising the Geological Survey Dept.
(viii) Partially privatise ZMDC – ZMDC is reportedly dead broke which led to speculations that they cannot afford to explore their numerous claims. Many assertions are constantly being thrown around which are of the view that ZMDC is sitting on dead assets and the government has no money to give to carry out high-risk exploration. Therefore, this has led experts into believing that, ZMDC must be listed on the stock exchange to raise money, and the government gets diluted to less than the controlling shareholder.
(ix) Promote exploration seriously with good tax breaks for companies who put a high-risk exploration $ into the ground.
(x) Digitalise mining rights, title registration, and all payments – Amidst reports of corruption, money laundering, externalization, and other unscrupulous behaviour by mining personnel, all transactions which are mining-related in Zimbabwe need to be done digitally to avoid corruption and Improve transparency.
The government of therefore needs to prioritize these 10 points for the sector to achieve the 12-billion-dollar status without which it will be just another project that will never yield results like the other targets previously set by the government.
This article first appeared in the December 2020 issue of Mining Zimbabwe Magazine