Last month the President of Zimbabwe Emmerson Dambudzo Mnangagwa unveiled the USD12 billion road map with aims at developing the mining sector in Zimbabwe to a USD12 billion industry by 2023. 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.
Rudairo Dickson Mapuranga
The President’s USD12 billion road-map has put a target of USD4 billion for gold producers which is a third of the target while platinum and diamonds will weigh in with US$3 billion and US$1 billion, respectively. Chrome, Nickel and Steel are expected to generate USD1 billion, coal and hydrocarbons are also expected to produce USD 1 billion. Lithium at the moment is expected to produce USD0.5 billion while other minerals are forecast to produce USD1.5 billion up to USD 2 billion.
It is a well-known fact that Zimbabwe is hamstrung by a lack of mining exploration, moving to the USD12 billion industry by 2023 and of course becoming a middle-income earner by 2030, investing in mining exploration is the key. However, it is also a known fact that tapping of the known deposits in the country should be of primary concern.
Investment in mining prospects should be the country’s number one concern towards improving the mining sector and the economy at large. Is it possible for the sector to earn 12 billion annually by 2023?
Is the USD12 billion target achievable?
With the copiousness mineral deposit, the country is sitting on both under exploitation and unexplored but known resources, the country has the potential to earn and turn the wheels of the economy and transform the country into an upper-middle-class earner not later than 2023. It is, therefore, Mining Zimbabwe’s opinion that the country can reach the president’s vision of the country becoming a middle-income earner by 2030 with the backup of the mining industry.
The miners’ support
The Miners in Zimbabwe have thrown their weight behind the USD12 billion roadmap for the mining sector in the next three years optimistic that the target was achievable, however, miners are of the knowledge that certain initiatives, policies, and reforms need to be looked into for the sector to achieve the USD12 billion fate.
USD 4 billion for gold, is it possible?
The mining sector last year earned US$3,4 billion, driven by the high performance of the gold sector, which delivered a record 33,2 tones. Overall last year the sector failed to earn USD 4 billion how can the sector as a whole achieve that feet?
Experts are of the view that the majority of Zimbabwe’s gold is being smuggled out of the country through different channels and the nation is losing millions due to rampant smuggling.
In order to achieve the USD 4 billion mark, there are various factors that need to be addressed by the government for the gold sector to achieve the target.
(a) Curb gold smuggling there are various reasons which has led to gold smuggling from Zimbabwe among them, the 55/45 per cent retention, late payments from Fidelity and various Statutory Instrument (SI) implemented by the government.
In order for the sector to achieve the target, it is of paramount importance for the government to consider paying gold miners what they are demanding, pay the gold producers on time to limit alternative markets and remove the current SIs gazetted by the Minister of Finance Mthuli Ncube which banned the use of foreign currency in all local transactions and pricing of equipment in foreign currency.
(b) Invest in gold prospecting –
The government of Zimbabwe needs to revive the gold mining sector by investing in gold mining through Fidelity, supplying miners with equipment, make public the gold development fund and issue miners with prospecting licenses on time in order for them to acquire loans. Geologists believe that there is a little activity happening along the Great Dyke for the country to reach full gold exploitation.
(c) Invest in Exploration –
Production in 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 much EPOs as possible to various EPO holders.
USD 4 billion nearly not possible
Identifying a gold mine is a daunting task, it can take up to 10 years for geologists, chemists, and engineers to examine a potential site. And even then, the likelihood of a mine being developed into a production gold mine is less than 0.1 per cent. Only ten per cent of these sites contain enough gold to justify further development. But above ground, gold is everywhere. New deposits of gold are increasingly hard to come by and increasingly difficult to locate. Geologist have estimated that only 55 tons remain buried away in the Earth’s crust. This means, if current global mining rates continued, we could run out of newfound gold in just 20 years. So as gold Mining continues to slow and the cost associated with mining increase to meet the challenge of extraction, gold could become even more expensive.
Can the intended target for PGM be reached?
Zimbabwe hosts the second-largest platinum group metals (PGMs) resource in the world on the Great Dyke. An estimate of 2.8 billion tones PGM ore at 4g/t 4e is estimated to lounge on the Dyke. Grade and thickness of ore body persist over large areas.
It is indeed true that the sector can contribute up to USD 3 billion and push the economy of Zimbabwe to yester year’s heights thereby helping the nation reach the USD 12 billion target however it could be difficult for the country to reach by 2023 without the necessary steps taken by the government.
It is, however, of no doubt that the PGM sector has all it takes to contribute even more than its projected target through the coming in of projects like Karo and other platinum mining firms.
The possibility of diamond contributing USD 1 billion Is it very high?
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, 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 diamonds 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.
The president of Zimbabwe and the Minister of Mines and Mining Development were optimistic that the diamond sector will have an immense contribution than before through the coming in of world’s biggest miners in the diamond sector like Anjin, Alrosa, and Vast Resources.
It is, however, important to note that Zimbabwe is at loggerheads with the west, the selling of its diamonds is at risk with the US Customs and Border Protection alleging the use of forced labor in Zimbabwe’s diamond mining sector. The sector could lose market if the government does not prove to the world that the allegations are malicious.
It is not a big target for Chrome, Nickel and Steel to generate USD1 billion?
Zimbabwe has the second-largest high-grade chromium ores in the world after South Africa with reserves of approximately 10 billion tones. The country has more untapped than tapped Nickel deposits with only Trojan mine in Bindura only mining the mineral at a very low scale.
Only steel production can reach the target in this category if plans are in place to revive the sector. However, as of now it could be just wishful thinking with no plans in place.
The government also needs to address issues of predatory chrome pricing in order for miners to invest in the sector.
Half a billion for lithium?
Zimbabwe has one of the world’s biggest hard rock lithium. The Arcadia lithium project located near Harare, Zimbabwe, is considered to be one of the world’s biggest hard rock lithium resources.
Prospect Resources fully owns the lithium project, which is estimated to produce an average of 75,000 tones per annum (TPA) of spodumene and 155,000tpa of petalite concentrates during its 20-year mine life.
In 2010, lithium was added to the United States governments’ list of critical minerals — minerals that are important to the country’s manufacturing and defence industries, highlighting its growing importance in the global economy.
Through the Arcadia Lithium project alone, the sector can generate more than half a billion per annum, however, the project could start kick to its full potential slightly after 2023 which means that the government’s target may fall by the wayside.
USD 1, 5 billion from other minerals?
The country has one of the world’s highest mineral deposits with records showing that the country has got almost all the minerals found on earth. There are various projects underway from oil and gas to gemstones.
According to one miner, the gemstone sector only has the ability to earn USD 2 billion annually if the government through Minerals Marketing Corporation of Zimbabwe (MMCZ) focuses on promoting the sector to attract buyers and value addition.
Overall conclusion, can the sector earn USD 12 billion per annum by 2023?
Mining Zimbabwe believes that it is possible for the sector to earn more than USD 12 billion per annum, however, certain points need to be addressed before the government starts on preaching about the USD 12 billion mining sector.
The government of Zimbabwe needs to take on the following 10 priorities which will get the mining sector moving towards the USD 12 billion industry.
(i) 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.
(ii) Institutionalise the rule of law to end statutory risk
There should be no changes to rules and regulations without wide 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 through 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 switching off the internet services countrywide early this 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 so as 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 obviously the government gets diluted to less than the controlling shareholder.
(ix) Promote exploration seriously with good tax breaks for companies who put 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 behaviors by mining personnel, all transactions which are mining-related in Zimbabwe if done digitally this will avoid corruption and Improve transparency.
The government of Zimbabwe, therefore, needs to prioritise on these 10 points in order 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 1st appeared in the Mining Zimbabwe Magazine November 2019 issue