The Zimbabwean mining industry is at a significant juncture, as it desperately needs to put long-term plans and strategy for the next 10 to 20 years in place, to develop the mining sector, yield high returns on investment and raise the necessary funds to achieve such plans.

Botswana-listed investment banking group Imara Asset Management fund manager for the Imara African Resources Fund Bruce Williamson maintains that these plans will be achieved only if the government of Zimbabwe provides a sensible, clear and consistent tax regime and an investor-friendly mining policy, enabling mining companies to confidently plan for the future.

Taking Zimbabwe’s thriving mining industry in the early 1970s into account, during which the country ranked as the sixth-largest gold producer in the world, together with a thriving agriculture and tourism sector at that time, Williamson adds that there is no country in Africa that is as favourably positioned as Zimbabwe to use its mineral resources and agricultural opportunities to grow a powerful economic base once again.

The type of future that lies in store for Zimbabwe’s mining industry will be determined in the coming months by the newly elected Cabinet.

Williamson notes, however, that the immediate effect of the election has been negative, as is evident in the sell-off on the stock market, with foreign investors having sold down almost 20% after the results were made public.

“Business and individuals seem to have reacted cautiously to the election results, making return on investments impossible to speculate on”, he adds.

History
The once thriving mining industry in Zimbabwe, which continued to grow until the end of the 1990s – but never came close to realising its true potential – took a drastic turn for the worse at the beginning of the new millennium, when the mining sector was affected by hyperinflation and the eventual demise of the Zimbabwean dollar towards the end of 2008.

Williamson highlights that post-2008, the industry rebounded strongly across a range of commodities, such as gold, platinum-group metals (PGMs), chrome, ferrochrome, coal, copper, nickel, cobalt, iron-ore, phosphate and vermiculite, owing to higher commodity prices, but mainly because of mining companies’ ingenuity and endeavour, with very little new funding.

However, this growth has subsequently ground to a halt in the face of rising inflation, a serious shortage of power that led to ongoing power outages, a brain drain and significant uncertainty regarding the Indigenisation and Economic Empowerment Act that was signed into law in 2008.

The Indigenisation and Economic Empowerment Act, which is aimed at transferring mineral wealth to indigenous Zimbabweans, requires all foreign mining companies operating in Zimbabwe that are valued at more than one dollar to sell a 51% stake to locals.

The election results and the indigenisation issue have resulted in global investors, who are spoilt for choice, staying well away from Zimbabwe, Williamson says.

Further, he believes that the lack of adequate funding post-2008 has caught up with most mines and that mine personnel are once again battle weary.

Mineral Wealth and Exports
Zimbabwe has world-class PGM reserves and still attracted significant investments over the last ten years amid the most challenging conditions, courtesy of platinum miner Impala Platinum (Implats) and its subsidiary Zimplats, world number-one platinum producer Anglo American Platinum (Amplats) and LSE-, ASX- and JSE-listed Aquarius Platinum.

Zimplats’ Ngezi mine operation, which comprises three underground mines and a concentrator, is 87%-owned by Implats and is situated on the Hartley Geological Complex, in the Zimbabwean Great Dyke, 150 km south-west of Harare.

The Zimplats Phase 2 project, which was initiated in 2010, entails the development of a new two-million-ton-a-year underground mine, an additionally sized concentrator and associated module, as well as other infrastructure.

In the 2012 financial year, the Ngezi operation produced 187 100 oz of matte platinum.

This project will not only add an additional 90 000 oz/y of platinum to the group’s yield but will also increase production at Zimplats to 270 000 oz/y of platinum when it reaches nameplate capacity, expected in the 2015 financial year.

Zimplats also owns the Selous metallur- gical complex (SMC), which comprises a concentrator and a smelter, located about 77 km north of the mine, and the Hartley platinum mine, situated at the SMC, which is currently under care and maintenance.

Meanwhile, Amplats’ Unki mine is situ- ated on the Great Dyke of Zimbabwe, about 60 km south-east of Gweru.

The life-of-mine (LoM) of the current operations at Unki East extends to 2041, although the LoM could be extended to beyond 2055.

Further, Aquarius Platinum owns a 50% stake in the Mimosa mine, located on the Wedza subchamber of the southern portion of the Great Dyke, 150 km from Bulawayo, in southern Zimbabwe.

At the Marowa diamond mine, in Mazvihwa, 40 km from the asbestos mining town of Zvishavane, in the Midlands province, in south central Zimbabwe, 402 554.30 carats were recovered in 2012. It is jointly owned by mining companies Rio Tinto and RioZim.

The diamond operations in the Marange/Chiadzwa diamond fields have been successful, says Williamson.

Meanwhile, since coal miner Makomo Resources was established in 2010, it has become a major player in the coal mining arena, with a production level of more than 200 000 t/m. This production level has made Makomo Resources the second- largest coal producer in Zimbabwe, after JSE-listed coal producer Hwange Colliery Company.

Williamson notes that the Sharwa mine owned by vermiculite producer Samrec Vermiculite Zimbabwe and the Dinhidza mine owned by trader of raw vermiculite Wickbury Investments are now both producing vermiculite.

Investments have been limited for the rest of the commodities, but there is sub- stantial interest in gold – which recovered from about 115 000 oz in 2008 to almost 750 000 oz in 2012 – chrome, diamonds, coal, natural gas and coalbed methane, nickel, phosphates and vermiculite.

Williamson says that mining dominates Zimbabwe’s exports and, in 2010 to 2012, the mining industry, excluding diamond mining, which is not widely disclosed, accounted for 42%, or $1376-million, of total exports in 2010; for 57%, or $2010-million, in 2011; and for 50%, or $1925-million, in 2012.

In turn, gold and PGMs dominate the mining-sector exports, with gold accounting for 28%, 33% and 42% and PGMs for 41%, 38% and 35% of the exports from 2010 to 2012.

Further, a substantial portion of the nickel exports for the same period – 8.1%, 8.7% and 6.0% – is also attributable to the PGM miners.

Mining exports for the six months to June 2013 were estimated at $934-million.

The Way Forward
The future of the Zimbabwean mining industry, Williamson says, is a case of being either in or out of the industry.

“While Zimbabwe is a no-go zone for the majority of global mining investors, for those that have operations in Zimbabwe it is a case of working around the issues, with a fair amount of belief that things will ultimately normalise,” he notes.

Zimbabwe’s mining tradition exceeds one hundred years, has substantial on-site resources and reserves and it produces about 30 mineral-based commodities, which means that miners are spoilt for choice of opportunities.

The country also has great weather, a relatively skilled and largely English-speaking population and is a day’s travel by car away from Johannesburg.

Williamson says that the significant mineral wealth will remain in the ground unless government adopts progressive investment and tax codes and rehabilitates the country’s power, water, transport, telecommunications and border-control infrastructure at a cost of $5-billion over the next five to seven years, as estimated by the Zimbabwe Chamber of Mines.

He also believes that a move in this direction will, in turn, prompt miners to raise funds to rehabilitate and expand their operations.