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Regenerating the Zimbabwe ruins

IN THE OFFING

Zimbabwe is currently trying to rebuild its economy after a decade of 

turmoil, and the mining industry has a big part to play.

WILLEM SMUTS takes a look at some of the positive developments.

A power-sharing government, set

up by President Robert Mugabe

and Prime Minister Morgan

svangirai last year, exchanged

a worthless local currency for multiple

foreign currencies, taming hyperinflationand stabilising the economy. Tis paved

the way for the resurgence of activity in

the mining industry. Most mothballed

mines have come back into production

and there are renewed activities to do

with upgrading and new developments.

Zimbabwe is witnessing a revival in

its mining sector, with major companies

committing to a number of significant

platinum projects. And if Zimbabwe

decides to tap into its mining resources

properly, the country will be on the wayto high growth figures. New mining in-

vestment in Zimbabwe is growing fast,

despite investor concerns about impend-

ing indigenisation legislation.

Mugabe has assured mining company

executives that his government had no

intention of expropriating the mining

industry, and this has resulted in several

mining firms flocking to the country. Te

view that indigenisation legislation may

be softened in the country was support-

ed by recent announcements about capi-

tal commitments by significant playersin the mining industry.

Big moneyTe country’s mining sector requires

between US$3 billion (approximately

R21 billion) and US$5 billion (approxi-

mately R30 billion) over the next five

years to recapitalise, and the govern-ment must come up with policies that

attract foreign capital to the sector, the

president of the Zimbabwean Chamber

of Mines, Victor Gapare, said in July.

Speaking at a mining finance workshop

organised by the Chamber in Bulawayo,

he noted that the economy in its present

state did not have the money required to

recapitalise the sector and foreign capi-

tal would have to be sought.

Gapare said most of the country’s

mining houses were in desperate needof recapitalisation as no capital invest-

ments took place over the past decade

owing to the economic environment.

He added that the country was endowed

with rich mineral resources but investors

were not forthcoming because of policies

that scared them away to countries with

poorer resources than Zimbabwe. “We

need to create an environment to attract

capital,” he said.

Steady now, steady!

 According to Gapare, recent proposals byfinance minister, endai Biti, to do away

with a special initial allowance (SIA) for

companies starting mining operations

would have

an adverse effect on the sector as this

would increase the setting-up cost of 

mines. In his 2010 budget statement,

Biti announced that he would review the

SIA, which gave tax breaks to mines in

his 2011 budget statement.“At a time when the industry needs

capital, the minister of finance is consid-

ering scrapping the special initial allow-

ance. If scrapped, the rate of exploration

will be slower,” he said.

Gapare said that by the end of 2008,

all major mines, except three, were in

care and maintenance owing to under-

capitalisation. Gold production plunged

to a record low of 3 t in 2008, as mines

choked from hyperinflation as well as

acute foreign currency and electricityshortages. At its peak in 1999, Zimba-

bwe produced 27 t of gold.

Platinum – the big storyTe country has long been an attractive

target as it contains the world’s second-

largest deposit of PGMs in the Great

Dyke Formation, which stretches about

550 km. Zimbabwe is second only to

South Africa, where all major mining com-

panies have several operations in terms of 

the exploration and production opportu-

nities it boasts. In a recent report, Anglo

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  m    S

  m  u   t  s

BELOW Zimbabwe has the world’ssecond-largest reserves of platinum and

chrome after South Africa

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companies valued at over R375 million

must divest 51% of their shares to black

locals within five years.

Impala Platinum also announced

recently that its Zimplats subsidiary

will press ahead with a US$500 million

(approximately R3 billion) expansion

at Ngezi, which is the largest mine in

the country. Te number two producer

expects the project to improve its an-

nual output by approximately 50% to

270 000 oz of platinum.

Impala is also developing a 50:50

  joint venture with Aquarius Platinum,

the world’s fourth-largest platinum

producer, at the Mimosa Mine. his

facility is expected to offer output of 

200 000 oz PGM in the financial year

to June, representing an impressive

rise of 20 000 oz from the previous12-month period.

Gold in them hillsZimbabwe produced just over 4 t of gold

in the first half of the year and is on track

to double last year’s output despite regu-

lar disruptions to electricity supplies,

the Zimbabwe Chamber of Mines said in

mid-August, projecting just over 8 t for

the full year. Tis would be doubling last

year’s production, despite ongoing elec-

tricity shortages.

Te chamber has set a production tar-

get of 20 t over the next five years, but

says this could be held back by frequent

power cuts and the government’s em-

powerment laws, which seek to trans-

fer control of foreign-owned firms to

local blacks.

 Against this positive backdrop, Cana-

da’s New Dawn Mining Corporation an-

nounced a deal on 16 June to acquire a

majority of Central African Gold and con-

solidate the firms’ seven mines. It aims to

produce 50 000 to 60 000 oz of gold with-in two years and eventually expand to as

much as 250 000 oz. New Dawn said that

the investment represents a substantial

increase in its gold mining business, as

well as a focus on, and commitment to,

ABOVE Most mothballed mines havecome back into production

BELOW The geology of Zimbabwe is averitable treasure chest

Platinum, the world’s largest producer

of the precious metal, confirmed that itsUnki Mine will be launched in October,

with potential output of 65 000 oz/yr.

Tis is despite the Zimbabwe indigeni-

sation law, which came into effect on 1

March 2010. Te law states that foreign

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the Zimbabwe gold mining industry.

Mwana Africa reopened the Freda Rebec-

ca last year and aims to increase produc-

tion to more than 50 000 oz of gold per

year by the end of September.

Zimbabwe mining group, RioZim, is

in the process of raising US$40 million

(approximately R290 million) in a rights

issue to fund the expansion of its gold-

mining projects and refurbish a nickel

refinery. RioZim, from which Rio into

separated from in 2004, operates the

Renco Gold Mine and Empress Nickel

Refinery, but wants to revive gold min-

ing at Cam and Motor in central Zimba-

bwe and start chrome mining in a joint

venture project.

RioZim also owns 22% in Murowa

Diamond Mine, with the remainder held

by Rio into. RioZim’s chief executive,Josphat Sachikonye, told shareholders

that annual gold output was set to rise

from 24 000 oz this year to 70 000 oz

in 2013, reaching 112 000 oz in 2015,

following the new investment. RioZim

would use US$13.8 million (approxi-

mately R100 million) to retire expensive

debt, while the remainder would go to-

wards exploration and ramping up gold

output and refurbishing the nickel refin-

ery, which refines nickel and copper mat-

te from Botswana. Te company expectsto start producing 30 000 t of chrome

concentrate per year from 2012.

Coal critical to Zimbabwe’senergy future

 According to the Chamber of Mines fig-

ures, Zimbabwe’s coal output has sharp-

ly declined from nearly 6 million tonnes

in the 1990s to just over 1.667 mil-

lion tonnes in 2009. Te decline in coal

output is largely owing to lack of funds

to recapitalise the Hwange Colliery Com-

pany, in which the cash-strapped Zim-babwe government is the largest single

shareholder, with 43%.

RioZim owns the Sengwa Coal Mine

in north-western Zimbabwe in a 50:50

 joint venture with Rio into. Small-scale

mining at Sengwa, which produces 25

000 t per month for the local tobacco

industry, was stopped in May 2008 at

the peak of Zimbabwe’s economic crisis.

Sengwa has proven ore reserves of 519

million tonnes and a total resource of 

1.3 billion tonnes. RioZim says Sengwacoal is best suited to support a thermal

power station, and the firm is currently

holding discussions with undisclosed

potential investors interested in setting

up a coal-fired 2 400 MW power plant at

the mine. “We would want to have a sen-

ior partner who would build and operate

the station. We are not in the business

of power,” said Paul Markham, RioZim

operations director.

Te recent resumption of the issu-

ing of new exploration leases (special

grants) by government has seen a flur-

ry of entrants to the coal-exploration

scene. Zimbabwe probably has the best

potential for the development of coal-

bed methane projects in Southern Africa

and companies such as Afpenn Lupane

Developments have been quietly work-

ing since the early 90s to prove that CBM

can work in Zimbabwe. With appropri-

ate support and security of tenure, these

players are set to make significant strides

forward in developing a more autono-mous energy future for Zimbabwe.

Landlocked recently signed a memo-

randum of understanding with Mozam-

bique to develop the deep-water port at

echobanine. A new 1 100 km railway at

a projected cost of US$7 billion (approxi-

mately R50 billion), linking echobanine

to Botswana and passing through Zim-

babwe, forms part of the agreement. Te

preparatory phase, including the mobi-

lisation of finance, should be completed

by the end of 2011, and the first phaseof construction will take place between

2012 and 2015.

Botswana believes the echobanine

Project will greatly improve imports and

exports, significantly reducing depend-

ency on South African ports, as well ascutting unnecessary time loss owing to

port congestion in South Africa. Tis

development will also have far-reaching

spin-offs for the Zimbabwean export

coal industry.

Second indaba looking to bea humdinger

 At the time of going to print, 400 foreign

investors had confirmed their participa-

tion in the forthcoming second Zimba-

bwe Mining Indaba Conference to be heldfrom 15 to 17 September.

Te indaba has generated a lot of inter-

est from both local and foreign investors,

with a total of 1 000 delegates expected to

attend the event, which aims to provide a

platform for investors to network and get

into strategic partnerships.

Representative of the conference fa-

cilitators, Washington Mehlomakulu,said that while the inaugural conference

focused on reassuring investors of the

sound investment climate in the coun-

try, the second conference will provide

a platform for investors to network and

share ideas on ways to grow the localmining industry.

“I can confirm that so far a total of 

1 000 delegates have confirmed their par-

ticipation at the prestigious conference,

and this year a lot of attention will be on

minerals such as chrome, coal and dia-

monds,” said Mehlomakulu.

Te conference comes at a time when

the mining industry is projected to

play a critical role in the revival of the

local economy.

With ever-increasing instability and un-certainty in other mining destinations in

Central and Southern Africa, Zimbabwe

may be the best-kept, secret new destina-

tion on the cards – but not for long…

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  m  u   t  s

ABOVE The hills are alive with thesound of explorers since issuing new

exploration leases and more risk capitalbecoming available

Zimbabwe probably has the best potential for the development

of coal-bed methane projects in Southern Africa 

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