Zimbabwe mines teeter on brink
MINING companies in Zimbabwe want the government to take corrective measures next year to salvage the cash-rich industry from collapsing under the heavy saddle of delayed payments, demands that they give up land claims, capital constraints and escalating costs driven by workers’ salaries and taxes.
Impala Platinum, Metallon Corporation, Caledonia Mining and Sibanye Gold are among the foreign mining houses in Zimbabwe. Others are Anglo Platinum as well as local resource miners RioZim and Falgold.
A mining sector survey for this year released yesterday and commissioned by the Chamber of Mines of Zimbabwe shows that gold and platinum mines are running above 75 percent of capacity. Implats has just approved a new mine for Zimbabwe while gold mines such as Blanket, Metallon and Freda Rebecca are also expanding.
Consolidation However, it is not so rosy for coal, nickel and diamond mining, with Mines and Mining Development Minister Walter Chidhakwa saying gem mining in the country has been hobbled by court cases in which operators are challenging the government’s diamond sector consolidation.
Zimbabwe is consolidating all diamond mining in the country into one company in which the state will own half of the shares. This has not gone down well with some of the operators that are now locked in court battles with the government.
The majority of respondents to the survey “indicated that the current fiscal regime for the mining sector is undermining the competitiveness of the mining industry” thereby holding it back from growth. “The overall environment remains predominantly uncompetitive, unpredictable, uncertain and inconsistent and 60 percent expect the government to take corrective measures in 2017 to address some of the concerns,” says the report.
This year has been particularly turbulent for mining houses in Zimbabwe, with costs spiking and profit lines taking a knock. As a result of this, about 60 percent of the industry “reduced headcounts in 2016” with half of this in retrenchments.
The major reason for retrenchments was given as “curtailing” costs. The cost pressures have not abated and all mining houses in Zimbabwe say they will not be able to afford salary hikes next year and this could put them on a collision course with unions that are already pushing for a wage increase next year.
But despite facing headwinds, some mines in Zimbabwe are opting to adopt a longer-term view of the country. Others are also seeing brighter prospects from current and fresh investments, although during the 11 months to the end of November, there were no new investments.
“Demand for electricity is anticipated to increase to 170 megawatts 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,” according to the survey report.
The state power utility in Zimbabwe, Zesa, is, however, asking the heavy users to pay up front for guaranteed power supplies. Mining companies say they have for a long time been assisting the power utility with advance payments.
Chidakwa told mining company executives yesterday that “the best incentive for the mining industry” was to provide it with the right operating environment. He was in discussions with government to ensure that the industry had guaranteed power supplies, especially for chrome smelting.
“Their consumption of power for the chrome miners is high; they are big guzzlers of electricity and then you come to your Zimplats, Unki and Mimosa and the gold mines,” Chidakwa said. Although some mining houses are expanding, there were no applications for exploration licences this year.
“Ninety percent cited funding constraints as undermining implementation of planned expansion projects. “Capital constraints, constraints in electricity supply, high cost of electricity, low feed-stock and low commodity prices, were cited as the major challenges in initiating beneficiation facilities,” the report says.