GOXI

sharing in governance of extractive industries

The Herald: Zimbabwe's mining sector poised for growth

By Tawanda Musarurwa

ZIMBABWE could experience significant growth in its mining industry by the close
of 2010 as indicated by the number of sector expansion projects on the
cards, but only on the basis of re-entrenching key macro-economic
fundamentals and strengthening of capacity recovery.


Growth of the mining sector has this year somewhat circumvented impediments in the broader economic environment, especially
those relating to the glut of bottlenecks including power shortages,
lack of affordable long-term loans from local banks, minimal external
sources of funding, high tariffs and utility charges and Zimbabwe’s
high-risk country profile.

According to Finance Minister Tendai Biti’s mid-term fiscal policy
review, the mining sector recorded an upward increase in production in
almost all minerals with the exception of asbestos, and the country
realised around US$650 million in mining exports as at June 23.

The enhancement in the country’s mineral exports so far has been
augmented by currency and metal prices trends on the global arena.

The US dollar has failed to firm on a consistent basis and metal prices
have been buoyed by the soft benchmark currency this year.

Mining is expected to contribute 31 percent to Zimbabwe’s Growth
Domestic Product, reflecting a downward revision from the initial 40
percent forecast despite the review of royalties on precious metals by
the Finance Minister, which has resulted in an increase from 3.5 percent
to 4 percent of gross revenue.

The royalties applied to base metals remain unchanged.

However, real growth in the mining sector growth could remain in
stagnant mode despite the numerous expansion programmes in view of the
prevalent illiquidity in the market.

Growth is fundamentally dependent on a downward review of Zimbabwe’s
perceived country risk and as such companies will be able to raise
capital to expand their production capacities.

Utilities and local authorities are required to provide efficient and cost effective services.

Presently the costs of such services are topping regional averages, with the exception of Angola.

Power shortages are also limiting production. A case in point is
Zimbabwe’s largest gold mine, Metallon was significantly affected by the
power crisis as its gold output tumbled by 70 percent attributed to the
energy woes.

The country is at present facing a huge power deficit of over 50
percent, as Zesa is only producing 900 megawatts against a national
demand of 2000MW and an installed power generation capacity of 2100MW.
As the situation stands, any new investment will further impel energy
demand.

Barring re-capitalisation constraints, a number of mining firms have
proposed to investment in in-house energy projects to preclude the
country’s electricity shortages.

Notwithstanding the macro-economic dispensation, several of the
country’s top mining firms across the board have indicated significant
expansion programmes.

Among the major ones include: Zimplats Holdings Limited recently
indicated that the Implementation of Ngezi Phase II Expansion Project
commenced and that funding for the project had been finalised.

The project, coming at an estimated cost of US$445 million will consist
of a two million tonnes per annum underground (mtpa) mine, two mtpa
concentrator module, a 35 000 mega-litre dam and, a nine kilometre ore
overland conveyor and 1 125 employee houses.

Included in Zimplats’ current expansion drive is the development of
Bimha Mine, which the company said was still on course for completion by
May 2011.

Gold miner Blanket Mine recently pointed out that ongoing expansion
drive of its Number 4 Shaft at the mine is continuing with commissioning
and ramp-up of production to about 40 000 ounces per annum expected
from the fourth quarter of 2010.

Zimbabwe’s gold production is continuing to rise.

According to recent Chamber of Mines indications, the country is
anticipated to achieve between 7 000 and 8 000kg of the precious metal
by the end of the year.

RioTinto announced that it has begun work on a US$300 million expansion programme for its Murowa diamond mine.

Mwana Africa plc says it requires US$26.3 million for Bindura Nickel Mine to complete the Trojan Nickel Mine project.

Also pending for the miner is the re-start of the Bindura smelter and refinery complex.

The proposed expansion and mine development projects are indicative of
growing Foreign Direct Investment in the local mining industry, which is
in stark contrast to investment trends in the sub-Saharan African
region.

Zimbabwe’s mining sector takes up the larger part of FDI in terms of value.

According to the United Nations Development Programme’s World Investment
Report 2010, individual projects show that the manufacturing sector
accounted for 41 percent of green-field investments between 2003 and
2009, in comparison to metals, which constituted 9 percent.

The continued rally in the country’s mineral output is set to ramp up
economic growth as the sector has since become the linchpin of economy,
taking over from manufacturing, which has shown amplified sensitivity to
the trappings of the structural weaknesses of a recovering economy.

Available: http://www.herald.co.zw/inside.aspx?sectid=954&cat=8&liveda...

Views: 130

Add a Comment

You need to be a member of GOXI to add comments!

Join GOXI

Conveners

           GOXI Partners

Videos

  • Add Videos
  • View All

© 2019   Created by Kobina Aidoo.   Powered by

Badges  |  Report an Issue  |  Terms of Service