Zimbabwe is betting that a combination of long-term mining rights, targeted tax incentives and greater policy certainty can persuade investors to commit the large amounts of capital needed to develop its mineral resources, with senior ministers pointing to the Karo Platinum project as an example of that approach, Mining Zimbabwe can report.
By Ryan Chigoche
Speaking on the sidelines of Monday’s signing ceremony for Karo’s 25-year Special Mining Lease, Minister of Mines and Mining Development Dr Polite Kambamura and Minister of Finance and Investment Promotion Prof Mthuli Ncube separately highlighted the investment framework surrounding the project, from security of tenure to fiscal concessions and the Government’s stake in the mine.
Karo’s lease covers 23,903 hectares on Zimbabwe’s Great Dyke and gives the project an initial 25-year tenure under the Mines and Minerals Act. More than US$240 million has been invested in its development to date, according to the company, while the first phase is expected to involve close to US$1 billion in investment.
The significance of the agreement, however, extends beyond the tenure itself. For Government, the challenge is to create conditions under which investors can commit capital to projects whose returns depend on decades of mining.
Kambamura said the lease establishes the fiscal and operational framework that Karo needs to raise further funding.
“Number two, it confers the long-term tenure to Karo Platinum with regard to the 23,903-hectare concession that they have,” Kambamura said.
“Also, it establishes the fiscal and operational framework which allows the company to get more funding for the establishment of the project.”
He said the agreement provided the certainty required by investors and demonstrated Zimbabwe’s willingness to offer security of tenure for long-term mining projects.
“And finally, it provides that certainty that is needed by investors,” Kambamura said.
“So, this is actually a testament enough that Zimbabwe is open for business and the security of tenure is provided.”
That certainty is being reinforced by Treasury through a package of fiscal incentives attached to the Special Mining Lease.
Ncube said the incentives are intended to help Karo raise additional capital, continue investing and improve the viability of the project.
Among them are tax write-offs during the first five years, allowing the investor to recover part of its initial capital expenditure, as well as special tax exemptions for employees to help attract skilled personnel.
“These come with Special Mining Leases regarding tax write-offs in the first five years. To allow them to invest and recoup what they have invested,” Ncube said.
The arrangement illustrates the trade-off Government is making to attract capital into a capital-intensive project: provide relief during the early investment and recovery period while retaining defined fiscal and equity interests as the mine develops.
The lease maintains a 7% royalty on platinum, according to Ncube.
“So, that is very clear in the lease agreement that ought to be met,” he said.
“We feel that it is the right combination of fiscal incentives to support this investment.”
Government Keeps a Stake
The State is also retaining exposure to the project’s long-term returns.
Ncube said Government holds a 15% free-carried interest in Karo, with an option to acquire a further 11%, potentially taking its stake to 26%.
“And that is a very good position to be in as a shareholder and as government,” he said.
The additional option should not be confused with an existing 26% holding: the Government currently has the 15% interest, with the further 11% subject to the option.
For Zimbabwe, the structure combines fiscal participation with direct equity exposure while leaving the developer and its investors responsible for the capital required to advance the project.
PGMs Gain Strategic Weight
The Karo agreement also comes as Government gives greater strategic weight to platinum-group metals.
Ncube referred to the new classification of PGMs as critical minerals under the Government’s evolving minerals policy, adding another dimension to the Karo investment.
The classification places the project within a broader effort to prioritise minerals considered strategically important to Zimbabwe, at a time when the country is seeking to expand production and extract more value from its mineral resources.
For Karo, that strategic positioning comes on top of a resource base that the company says includes an open-pit reserve of 2.1 million ounces of PGMs on a 4E basis, with a mineral resource of 11.2 million ounces, and potential underground mining supporting a mine life of more than 50 years.
Investment Expected to Extend Beyond the Mine
Ncube said the project is expected to create about 3,000 jobs at peak and stimulate development in the surrounding area, with investment in infrastructure and supporting economic activity potentially driving the emergence of new urban centres.
The expected impact extends beyond platinum production, with Government viewing the project as a potential catalyst for employment, infrastructure development and broader economic activity around the mine.
Kambamura also pointed to Karo’s development since 2018 as evidence of the patient capital required for large-scale mining projects. With a potential mine life of more than 50 years, he said the project required a strong foundation capable of supporting investment over several decades.
The 25-year lease now provides that initial legal and fiscal framework, leaving Karo to move into the next stage of development and convert the capital committed to the project into production and wider economic benefits.
