CoMZ banks sector’s growth on price upturn

CHAMBER of Mines Zimbabwe (CoMZ), says it is positive that mining Industry will continue on growth trajectory in 2022 bouyed by commodity price upturn, which has surpassed long term averages.

According to the London Bullion Market Association (LBMA), 2022 promises to be a year with many cross-currents given the geopolitical tensions in Eastern Europe.

In this regard, Zimbabwe as a major producer and exporter of gold, platinum group metals, diamond, chrome, iron ore, coal, lithium and nickel is earmarked to benefit from the anticipated booming prices.

The Russia-Ukraine conflict has been predicted to bolster safe-haven demand for metal commodities and analysts have since forecasted an average of US$1 895 per ounce of gold in the course of the year, while global inflation growth is likely to be another tailwind.

This is so because gold is considered a hedge against inflation, economic and political uncertainties.

Nickel another key Zimbabwean export has witnessed a 34.39 percent increase since the beginning of 2022 according to Trading Economics, while lithium prices continue to rally on firm demand, given the improving uptake of new energy passenger vehicles (electric vehicles) on the back of a global effort to reduce carbon emissions.

Also, ongoing recovery in vehicle sales from a dip during the Covid-19 peak period coupled with tightening emission standards will continue to boost platinum and palladium off-take for petrol vehicles catalysts while the two commodities supply remain in a shortfall, a position that is expected to keep the prices high in 2022.

Palladium is projected to continue in supply shortfall due to sanctions on Russia, the top producer of the auto-catalyst metal, to keep the prices on all-time high.

Isaac Kwesu, CoMZ chief executive, has hinted at local mining industry’s willingness to enhance export earnings from minerals while the government has set an eight percent growth projection for the mining sector in 2022.

He said local minerals output is likely to surge given a rise in the implementation of new mining projects, motivated by the surge in the global commodity price boom which has seen gold production reach a record level in more than two decades.

“The industry is doing its best, to the maximum of their abilities, like what I have said there has been some expansion, new mines being set up , ramp up production of existing mines all these are signs that we are committed.

“It is not just coming from the blue but there is a lot that is happening supported by firming commodity prices, which enhances support in terms of baseline,” said Kwesu.

Kwesu, however, bemoaned the high cost of funding from local banks citing that it had driven the sector to depend more on offshore funding. According to the mining industry representative body, there is a growing appetite for loans given the prevailing expansion initiatives being undertaken by the sector lately.

Local banks lending has been cited as short-term and expensive, automatically driving out the mining industry which realises returns over longer periods of time.

“Mining is capital intensive and when you look at the structure of our financial institutions, you find predominantly that most of the available loans are transitory, they are very expensive and short term hence our exposure to local lending is very minimum.

“We rely predominantly more on external funding as well as the plough backs, so those who make profits rely on their internal financing, but what we know is the appetite for capital is huge given all these expansion initiatives that I have mentioned,” said Kwesu.

According to statistics, key minerals extraction recorded significant growth in the first quarter of 2022.

The gold segment posted an 86 percent growth in mined volumes compared to the same quarter last year while lithium grew by 83 percent followed by diamond at 51 percent. Coal and platinum groups of metals (PGMs) posted 21 percent and 13 percent respectively.