Despite the political crises that are still ominously present in Zimbabwe, the mining industry grew by a massive 47% last year.
Zimbabwe Chamber of Mines president Victor Gapare says the industry’s growth rate in 2010 would have been significantly higher had it not been for political and infrastructural hindrances.
“The mining sector growth could be much higher but for the recurring challenges that continue to beset the economy, chiefly the lack of adequate, appropriately priced financing for recapitalisation and working capital. Additionally, recurring power outages continue to undermine production, and the failure of government to finalise the indigenisation and economic empowerment issues has been an issue limiting the industry’s ability to attract capital,” says Gapare.
He adds that the chamber projects further growth of 44% in 2011, which suggests that the industry is on the way to the beginnings of recovery.
“Gold, chrome and platinum continue to show strong growth, though all subsectors are in recovery and experiencing steady output growth, with notable exception of asbestos and perhaps granite,” says Gapare.
He adds that recovery of the industry can be attributed to the financial stability that it achieved under government’s Short Term Economic Recovery Programme.
“It is important to recall that, by end of 2008, all the mines were virtually at ground zero, except three or so mines that were operating, thanks to a special mining fiscal agreement that insulated the mines mainly in platinum and diamond sectors, from the domestic economic environment.
“Accordingly, the Chamber of Mines views the positive developments in mining and the economy at large as accruing to business-friendly economic policies of government in particular, liberalisation of gold marketing arrangements and use of multi-currencies in place of the discredited Zimbabwe dollar,” says Gapare.
Apart from 20 special grants which government awarded to coal-mining companies last year, Gapare reports that additional new applications are being processed. Prospecting is also ongoing in respect of gold, platinum and other minerals.
“Because of perceived high country risk, most of mining projects are significantly discounted and this is as good a time as you will ever get to enter the Zimbabwe mining industry.
“However, it’s fair to say that the chamber has seen a lot of interest in the industry but has not seen significant commitment of new money, save for Zimplats, which has committed about $450 million for its expansion programme, and a few other players. It seems to me that most investors are waiting for finalisation of the indigenisation and economic empowerment provisions,” says Gapare.
Zimbabwe has long been known as a platinum-mining hot spot.
Because government holds most of the country’s platinum resources, there is little leeway for further development in this sector.
Gapare says, however, that there is significant activity in prospecting for coal and gold within the country.
“If the gold industry in Zimbabwe can get $1 billion in new capital over the next three to five years, the chamber feels that gold production could rise to between 40 tonnes per yield (t/y) and 50t/y within a five- to seven-year time horizon.
“However, if the industry does not get that kind of money and has to rely on internally generated resources, then the industry would only grow by 25t/y to 30t/y within the same period,” concludes Gapare.