Mineral Production Up By 25% in 9 Months

ZIMBABWE’s mineral export earnings increased by 25,1% to $1,692 billion as at September 15, 2017, buoyed by the increase in all minerals production across the board, Mines and Mining Development minister Walter Chidakwa has said.

BY MTHANDAZO NYONI (NewsDay)

Addressing delegates at the Zimbabwe Alternative Mining Indaba 2017 in Bulawayo yesterday, Chidakwa said all minerals performed positively in the period under review, except diamonds, which recorded a negative variance.

 “As of September 15, 2017, cumulative mineral exports from January 2017 stood at $1,692 billion compared to $1,352bn during the same period last year, that is, January to September. This represents an approximately a 25,1% increase,” he said.

“Cumulative gold exports, as of September 15, 2017, stood at 14,731 tonnes valued at $631,84 million compared to 14,275 tonnes valued at $575, 978 million during the same period last year. This represents an increase of 3,2% and 9,7% in volume and value terms, respectively.”

Chidakwa said higher production figures could have been realised were it not for incessant rains, which affected gold production in the first quarter of 2016.

He said in the period under review, platinum generated $617m compared to $540m, diamonds $63,7m compared to $89,7m, gold $631m compared to $575m, ferrochrome $224m compared to $62m last year, and raw chrome $69m compared to $7,8m last year.

“Platinum has suffered problems of price. The price of platinum about five years ago rose to almost $2 000 per ounce and it came down progressively and is sitting at around $920 per ounce,”Chidakwa said.

“But what has happened is that the few companies that are mining platinum at the moment have increased their production. This is in spite of the fact that the biggest platinum company, which is Zimplats, suffered a collapse of the mine.”

Mining is one of the country’s biggest foreign currency earners raking in $2,2 billion last year from
$2,1 billion in 2015, with major contributors being gold and platinum group of metals.

Gold Mining Costs Down on Cost-Cutting Measures

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Mining costs down on cost-cutting measures – NewsDay Zimbabwe

MINERAL production costs declined in 2016 due to cost-cutting measures that were implemented by the mining sector.

BY BUSINESS REPORTER

In a State of the Mining Sector Report released on Monday, the Chamber of Mines said the sector had negotiated price reductions with suppliers, labour rationalisation (multi-skilling), retrenchments and negotiated wage reductions.

“Most minerals registered declined in production costs in 2016, compared to 2015, with 95% of respondents having reduced their costs in 2016 through the following, among other measures:
aggressive value chain optimisation to reduce excessive use of consumables and improved efficiencies,” the report said.

The mining sector is expected to prop up production in 2017, as 40% of the respondents were bullish that the sector will grow by at least 5% in 2016.

  The report states that 40% of the respondents are bullish, such that the sector will grow by at least 5% in 2016, while 50% plan to grow output by between 1% and 4%. Ten percent of the respondents are planning to maintain their output, while 90% of the value of mineral output is accounted for by five key minerals in 2016.

The report said average capacity utilisation for the mining sector increased from 60% in 2015, to 64% in 2016. It said the platinum sector continues to operate at full capacity, while gold recorded a 2% increase to 79%, from 77% in 2015.

Declines in capacity utilisation levels were recorded in respect of coal (50% to 30%) and nickel (55% to 41%).

The report said the low capacity utilisation was due to capital shortages as the major constraints undermining capacity utilisation, coupled with high cost structure and ageing equipment.

“Survey findings show that labour (30%), supplies (36%), power (16%) and statutory payments accounted for an average 95% of total costs in 2016,” the Chamber of Mines said.

Average profitability in the gold and nickel subsectors improved in 2016, compared to 2015, while that for platinum producers remained subdued. In 2016, total payments to government and government-related institutions (based on survey respondents) averaged around 13% of revenues and 16,9% of total costs.

Highest proportions were found in the gold sector, with 22% of revenue and 38% of costs, while the lowest were recorded in nickel and ferrochrome line (profitability).

The report states that the demand for electricity is anticipated to increase to 170 megawatts (MW) in 2017, if the industry secures additional funding for investments, while at current levels of capitalisation, demand will moderately rise from the current 130MW to 140MW.

“All respondents from the gold industry indicated that the current tariff applicable to gold of 12,8 cents/KWh is too high and should be reviewed downwards. Ninety percent of other mineral categories felt that the prevailing tariff should be reduced and aligned to regional benchmarks. Ten percent of respondents proposed a commodity price-linked electricity tariff,” the report showed.

Of the 60% respondents who reduced headcounts in 2016, 30% retrenched, while for the remainder, the reduction was on account of natural attrition and expiration of contracts.

The major reason for retrenchments was given as curtailing costs.

Gold Output by Small Scale Miners Doubles

OUTPUT by small scale miners has almost doubled in the last two to three months due to increased monitoring by government, an official has said.

BUSINESS REPORTER

An official with the Chamber of Mines of Zimbabwe said the country needs to ensure that gold produced by more than 400 milling plants in the small scale sector is sold through the approved marketing entities.

“With increased enforcement and monitoring recently introduced gold contribution by small scale miners have increased from about 250kg per month to over 400kg per month in these last 2 to 3 months,” the official said

The official said in order to increase output from small scale miners capital is required to mechanise their operations.

“This means to access capital small scale miners have to formalise and register their operations. I am aware of collective action involving the government through the Mines and Mining Development ministry and other ministries, Chamber of Mines and other small scale miners are working on various facilities for small scale miners to access such funding equipment and basic safe mining skills,” the official said.

He said since the introduction of the channelling of gold through Fidelity Printers an increase of 200kg per month was realised and this means 4,5 tonnes of gold being contributed by the small scale sector.

“I think deliveries are likely to increase further as medium term and long-term measures associated with formalising the artisanal mining activities and capacitating them are implemented,” he said.

Mines minister Walter Chidakwa’s recent remarks that there are serious revenue leakages resulting from side-marketing of gold especially by small scale miners and the government had adopted various measures which include greater police presence at mines and milling centres to force miners to sell to Fidelity Printers.

The drastic measures also include instructing the Zimbabwe Electricity Supply Authority to disconnect those millers who are not licenced from the electricity grid.

Source: Newsday

Blanket Mine investment to yield 267% internal rate of return

A preliminary economic assessment (PEA) on Toronto-listed Caledonia Mining Corporation’s Blanket mine has shown that the mine’s revised investment plan will yield an internal rate of return (IRR) of 267 percent.

In a statement, Caledonia said Minxcon Limited, an independent mining consultancy based in South Africa, had completed a scoping level study on the Blanket Mine in the form of the PEA.

“The key conclusions arising from the PEA are as follows: the IRR arising from the Revised Plan was calculated at 267 per cent, the net present value (NPV) for the Blanket Mine arising from reserves and the inferred resources used in the Revised Plan was calculated at $147 million; and of the ounces that need to be produced so that the cumulative cash flow arising from the Revised Plan becomes positive (i.e. the “Payback Area”), only 3 per cent will come from resources that are currently classified as inferred,” the company said.

Last month, Caledonia announced plans to invest $70 million to expand operations at Blanket Mine between next year and 2020 in the company’s revised investment plan and production projections for the mine. Under the plan, Blanket is expected to produce between 70-75 000 ounces of gold per annum by 2021.

The Revised Plan is expected to improve the underground infrastructure and logistics at the mine and allow an efficient and sustainable production buildup.

Caledonia CEO Steve Curtis said the project’s high returns expected from the revised investment plan is good for the company.

“I am encouraged that the revised investment plan for the Blanket mine has been validated by Minxcon, an external independent consulting group. The high projected IRR for the investment confirms this to be a very exciting project.

“The high proportion of the investment that will be recovered from the mining of reserves and resources with a higher level of confidence than inferred resources, also supports our view that the revised investment plan has been prepared on a conservative basis,”

Caledonia also said the revised plan would improve Blanket’s long term operational efficiency, flexibility and sustainability.

Source: bh24.co.zw

Govt plans new mining tax system

HARARE – Zimbabwe plans to introduce a new mining tax regime targeted at plugging mineral and revenue leakages as well as attract investors into the extractive sector.

Also, Finance minister Patrick Chinamasa said the move was aimed at striking a balance between revenue inflows from the mining industry, and its viability.

This is on the back of Zimbabwe hinging its economic growth hopes on the mining sector, but it has been weighed down by falling global commodity prices.

“The mining fiscal model will enable government to design an appropriate tax system that attracts investment into the mining sector and promotes optimal mineral extraction and revenue generation, without sterilising minerals, that is, extraction of high grade ores, at the expense of less economic grades,” the Treasury chief said in his 2015 National Budget.

He noted that the long-term sustainability of the mining sector required government to put in place a mechanism to assess the economic impact of various policy decisions.

“The model would be used as an audit tool to assess mineral and revenue leakages and also project future revenues from the mining sector,” he said.

Under the proposed system, mining houses will be compelled to provide data to tax collector Zimbabwe Revenue Authority (Zimra) such as exploration costs, pre and post-operative costs, debt-equity mix and repayment terms in a prescribed format.

“The effectiveness of the mine fiscal model is dependent on the availability of quality data from the mining sector.

“The availability of data will ensure transparency of the mining operations,” he said.

Chinamasa has projected a moderate growth of 3,1 percent next year for overall mineral output, being driven by nickel, gold, chrome and coal.

This comes as the re-enactment of a new Mines and Minerals Act has been stalled as the draft document is currently at the Attorney-General’s office for consideration.

In September, Mines minister Walter Chidakwa said the draft policy would be sent to Parliament for ratification and implementation after complete scrutiny by the AG’s office.

“Our problem is that at this very moment we have about 200 odd pieces of legislation at the Attorney-General’s office, all intending to comply with the new Constitution.

“They can only do so much in a day. I know the Justice ministry is working on mechanisms to speed up the processes,” said Chidakwa.

Among the key issues to be incorporated in the policy are minerals governance, regulatory framework, equitable and competitive fiscal regime, minerals marketing, competing land rights and use options.

Chidakwa said escalating production costs, limited access to long-term capital and depressed global metal prices continue to threaten the mining industry’s viability.

“There is nothing much you can do about international mineral prices.

“The projection of more than 10 percent was predicated on a higher upward trend of nickel prices,” he said.

He noted that although nickel production had significantly grown, the growth had not met expectations.

“The hope was that the good price would trigger more production. The natural affinity of miners is that when prices are favourable, they would ramp up production,” said Chidakwa adding that he still hoped production would increase before end of year.

Source: Daily News

Govt Guarantees SSM Loan

The government has approved a guarantee for small scale miners to access a US$100 million line of credit from a Chinese Developmental Bank.
Small scale miners are expected to access the credit line facility from a Chinese bank after the government resolved to provide a guarantee as collateral in getting the loans.

The Minister of Finance and Economic Development, Cde Patrick Chinamasa said the guarantee will enable the global financier to get assurance in terms of recovering funds in the event of default by some beneficiaries.

“We have now approved all the necessary requirements and it is our hope for success,” said Cde Chinamasa.

In terms of the facility, small scale miners are expected to get loans towards the purchasing of new equipment and are required to expand production and increase earnings.

The government is implementing policies to re-capitalise the small scale mining industry as evidenced by the reduction in gold royalty fees to five percent from seven percent and the scrapping of presumptive tax for primary producers of the yellow metal.

EU lifts economic sanctions on Zimbabwe

THE European Union has lifted its 12-year suspension of direct financial aid to the government of Zimbabwe, imposed after allegations of rights abuses by President Robert Mugabe’s administration, an EU official announced on Thursday.

Mugabe has regularly demanded removal of the sanctions which he claims to be illegal and blames for the country’s economic strife.

Officials however, said this is a major step towards the normalisation of ties but hastened to caution that the removal of the sanctions imposed in 2002 will not yield immediate results, citing the need to rebuild trust after years of frosty relations.

The bloc will, from 2015, start a 234 million Euro ($300 million) five-year funding programme to support health, agriculture and governance initiatives.

The EU move confirms a February decision by the 28-member bloc to resume direct aid to Harare, citing improvements in the political environment after the adoption of a new constitution and peaceful, if disputed polls, last year.

Apart from suspending direct aid, the EU also imposed travel restrictions and asset freezes on Mugabe, his family, political associates and senior government officials, but has eased these progressively since the veteran leader formed a power-sharing government with the opposition in 2009.

Mugabe, who retained full control of government after yet another disputed vote last year, and his wife are the only ones still subject to the travel ban, while a state-owned arms firm is also under an arms embargo.

The EU, which has remained a major donor to Zimbabwe, has channelled funds through non-governmental organisations and multi-lateral agencies, spending 1,5 billion euro ($2 billion) since 2002.

“We are most happy today to announce that the EU council confirmed this position and that appropriate measures will indeed effectively be lifted this weekend,” EU ambassador to Zimbabwe, Philippe Van Damme, flanked by diplomats from 10 EU states, told journalists in Harare.

The ambassador said the travel ban and asset freeze on Mugabe and his wife as well as the arms embargo on the country will be reviewed next February.

Van Damme dismissed claims that Zimbabwe had suffered under sanctions, adding that despite the measures, the country still enjoyed tariff and quota-free access to the EU markets under the Cotonou Agreement.

“We never had any trade sanctions vis-a-vis Zimbabwe, Zimbabwe always benefited from privileged access to European markets. I am stressing this because it is critically important to understand our relationship,” he said.

Govt to ‘clarify’ indigenisation law

FINANCE minister Patrick Chinamasa says government will clarify the indigenisation legislation to lure foreign investors needed to rebuild the economy.

BUSINESS REPORTER

Chinamasa said on Tuesday while receiving a delegation from the United Kingdom that a conducive environment should be created so that investors could come and invest in the country.

“There is no investor who can come to an environment where their investments are not secure. The clarification [of the indigenisation law] is important. As far as the clarification of the indigenisation law, the investors are not saying change your law, but what they are saying is: ‘Make it clear that there should be predictability and transparency’. They are not saying change your laws to suit us,” he said.

Chinamasa said the government was working on bottlenecks to investing such as delays in the approval of investment proposals.

“We are now identifying the bottlenecks and we should be able to address them. One was brought to our attention by IDC where it took 176 days to open an investment,” he said.

The Indigenisation Act was passed into law in 2008.

The UK trade delegation, the first visit in close to 20 years, will explore opportunities in Zimbabwe. The delegation was led by Alex Lambeth of British Expertise and had Ecorys UK’s Berry Sheils, Derek Landman from Turner & Townsend, Simon Gillet (Roughton International) and Gerard McDonald from WYG International.

Chinamasa said the visit was a step towards normalisation of relations with Zimbabwe, saying it was not an event, but a process.

British ambassador to Zimbabwe Catriona Laing said the British delegation had come into the country to understand the realities of doing business in Zimbabwe.

“The promised clarification of indigenisation policy is welcome, which, if handled well, could have a major impact. The government must also show observers that rule of law is paramount, underlining this message as much in political rhetoric as in the conduct of its institutions,” Laing said.

Britons plan $100 million Zimbabwe investment

The Zimbabwe Investment Authority says some British investors are keen on investing $100 million in the country’s energy sector.

Nigel Chanakira, the Authority’s chairman said the investors have enquired with ZIA about the investment, an engagement he said was the first of its kind in 15 tears.

He said that was specifically for a $100 million in power generation.

That is the indication in terms of volumes and values that can be done.

Chanakira noted that there had been few transactions that have been done out of the United Kingdom including the $265 million takeover deal of pan-African banking group ABC Holdings by London Stock Exchange listed Atlas Mara.

Zimbabwe is currently grappling with massive power shortages generating approximately 1 100 MW against national demand of at least 2 200 MW.

– dailynews
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Exploration way to go for mining

The mining sector has potential to turnaround the economy, if investment is channelled towards exploration and new mining development, a senior Chamber of Mines official (CoM) said.

 Zimplats CEO, Alex Mhembere

Zimplats CEO, Alex Mhembere

Zimplats chief executive and CoM president Alex Mhembere told delegates attending the 6th Mining and Infrastructure Indaba in Harare yesterday that approximately 60% of the
country’s land surface comprises of vast mineral resources not yet adequately quantified.

“There has been a significant increase in mineral production since 2009 but growth is expected to moderate due to the lack of capital investment in mineral development and exploration.”

Government recently resuscitated the Mining Promotion Corporation (MPC), an exploration company set to enhance efforts in quantifying the country’s mineral resources and reserves for mining development.

Mines and Mining Development minister Walter Chidhakwa expects the company to complement exploration efforts by private players as government search for partners in exploration.

“As the State, we must know the value of concessions. This requires comprehensive knowledge of our geology and mineralisation. Quantification and valuation of the unexploited asset will be done before engaging investors.

“We are using new technologies such as aero-magnetics, big data and cloud computing. As the government we will invest massively in these processes and yet even that will not be adequate without private sector involvement,” Chidhakwa told the same indaba.

Apart from exploration, Mhembere said there was need to resuscitate existing mines on care and maintenance to pre-1998 levels.

He also called for the need to focus on value addition, beneficiation and linkages.

“To achieve this, we need a common national vision, policy consistency, competitive fiscal regime, to attract investment to the sector and improve critical infrastructure, that is electricity, roads and water supply,” he said.

Mhembere decried that most mines were currently operating slightly above 50% of their capacities due to lack of finance for recapitalisation.

“The 2009 mining economic rebound driven by old reserves is fast depleting and there is urgent need for recapitalisation as opportunities exist
in organic growth and brown fields projects.”