Big miners adopt wait-and-see approach on Zim
WHILE Zimbabwe’s leadership change has sparked a race for the nation’s mineral riches among entrepreneurs and tiny explorers, big-name mining companies are taking a wait-and-see approach.
New President Emmerson Mnangagwa has a lot to prove as he seeks to revive the economy and attract mining investment that shrivelled under his predecessor, Robert Mugabe. So far, Mnangagwa has pledged investorfriendly policy changes and partially rolled back a law requiring mining companies to be locally owned. It seems to be working, at least in some quarters. The government says mining commitments reached as much as $6 billion (R75.56bn) since Mnangagwa’s appointment, including a record $4.2bn pledge from a company linked to mining entrepreneur Loucas Pouroulis for a platinum mine and associated infrastructure.
Others looking to invest include industry veteran Andrew Groves and his business partner and former England cricketer, Phil Edmonds. And South Africa’s Moti Group is preparing to double its investments in the country to $500 million, including in projects ranging from chrome-ore mining to fertilisers and diamond polishing.
For now though, large producers, including Anglo American Plc, have indicated more needs to be done on policy before they’ll make big decisions. Elections later this year will also be a big test for Mnangagwa and his government.
“It’s going to take a lot more confidence building before you get majors investing big monies,” said Ben Davis, a Londonbased analyst at Liberum Capital Ltd. “They need a bit more certainty, and that can’t just happen with words.”
Zimbabwe has the world’s second-largest platinum reserves after South Africa, as well as large deposits of lithium, coal, gold, diamonds, chrome and nickel. A lot of the resources are at shallower depths compared with South Africa, where the easily-accessible ore has been mined out.
“This is yesterday, that’s tomorrow,” Moti Group Chairman Zunaid Moti said last month, comparing mining potential in his home base of South Africa to that of Zimbabwe. “It’s virgin.”
Investment slowed amid tough local-ownership laws combined with Mugabe’s threats to nationalise mines and seize the land they owned, while compelling operators to build pricey refineries. Mines faced perennial power outages because the state utility wasn’t paying debts to foreign suppliers, and a weaker platinum price in recent years reduced the incentive for investment. Spot platinum traded at $925.60 an ounce.
Mines Minister Winston Chitando told a Johannesburg conference last week that changes to the mining laws should be passed before the end of May. The new administration has changed local ownership rules so that only platinum and diamond mines must be 51% locally owned.
The bigger investors will be watching Zimbabwe’s elections later this year and will probably adopt a “wait-and-see attitude” until regulatory guarantees are in place, said Jee-a van der Linde, a mining analyst at NKC African Economics.
“It is difficult to simply forget the chronicles of the Mugabe era,” Van der Linde said.
“The new administration will be better off scrapping regulations that are discouraging to investors, instead of boasting about the country’s potential at investment conferences.”
Anglo American Platinum Ltd, which owns the Unki mine and is building a smelter in Zimbabwe, needs to see “more colour” before taking further steps, Mark Cutifani, the chief executive of controlling shareholder Anglo American Plc, told analysts in February. An Anglo Platinum spokeswoman declined to comment further last week.
Impala Platinum Holdings Ltd sees the new government’s attitude as “very positive”, but won’t be investing in a platinum refinery despite government pressure, chief executive Nico Muller said in early March.
Zimbabwe needs to make sure that the mining-law overhaul is thorough, as investors will be suspicious of superficial changes, said Charles Laurie, director and head of politics at Uk-based risk-advisory company Verisk Maplecroft.
“A high-risk, high-reward frontier mindset – for at least the near-term – will be the order of the day for all investors considering Zimbabwe,” Laurie said. – Bloomberg