The Sunday News
Dumisani Nsingo, Senior Business Reporter
BIG mining houses operating in Zimbabwe are fully supportive of the Government’s call for beneficiation and value addition with at least half of the companies having invested in various projects aimed at meeting the requirements, a survey has shown.
According to a mining survey conducted by the Chamber of Mines of Zimbabwe which was released this month, all mining houses fully subscribe to the beneficiation and value addition agenda in mineral resources, with 60 percent of the mines having invested in various projects of such a nature over the past 10 years.
It noted that the list of projects reviewed include new plant installations estimated to be at 33,2 percent while plant refurbishments is at 42,2 percent and plant upgrades at 24,6 percent.
“On beneficiation, all respondents (100 percent) subscribe to the beneficiation and value addition agenda in mineral resource . . . all the platinum producers have installed onsite concentrators for treating ore into concentrates. One of the producers also owns a smelter which treats concentrates into mate.
“One producer is also expecting to commission its Base Metal Refinery (BMR) in July 2016. The BMR will further beneficiate the convertor mate by producing a platinum group metals (PGM) cake, copper cathode and nickel sulphate. The survey revealed that another player has a $55 million smelter project which is at pre-feasibility study.
The project is expected to be completed by July 2018,” read part of survey results.
Owing to a significant drop in commodity prices on the world markets over the past few years there have been calls for mining companies to refocus their energies away from production of raw materials to investing in value-addition and beneficiation strategies and technologies.
Thus, Government’s economic blueprint, Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset), has been premised on value addition of mineral resources and agricultural products.
The survey also revealed that the mining industry excluding diamonds requires about $3,8 billion in the next five years to remain viable and to play a part in the turnaround of the country’s economy with $1,2 billion being required to stay in business while $2,6 billion is for developmental investments.
The mining sector has become the key driver of the country’s economic turnaround, hence generating a lot of interest from many stakeholders, who on many occasions have questioned on a number of issues relating to its performance.
“The country appears to continue losing diversity in terms of mineral revenue with the top three minerals constituting 72 percent of mineral value in 2015 (up from 69 percent in 2014) while top four minerals constitute 83 percent (up from 80 percent) in 2014. The top five constitute 91 percent, (up from 90 percent in 2014).
“Most minerals recorded declines in output in 2015, compared to 2014. Chrome recorded the highest decline of -48 percent, followed by coal (-34 percent), diamond (-30 percent), nickel (-3 percent). Gold output recorded an increase of 30 percent, while platinum remained flat,” said the Chamber of Mines.
Total value of minerals generated in 2015 declined by seven percent from $1,95 billion in 2014 to around $1,8 billion last year.
The survey said average capacity utilisation for the mining sector declined from 71 percent in 2014, to 60 percent in 2015.
The platinum sector continues to operate at full capacity while significant declines in capacity utilisation were registered in coal (down to 20 percent from 34 percent) and chrome (down to 29 percent from 76 percent).
“The declining mineral grade (at a time mineral prices are depressed) may be a reflection of the lack of investment in development (and exploration) over the years. Under normal circumstances mines are expected to go for higher grades to increase production to cover the potential revenue loss from low prices,” read part of the statement.
The survey identified four major cost drivers in the sector as wages, stores and supplies, power and royalty.
Stores and consumables at 36 percent of the total costs constituted the biggest chunk of the total costs, followed by wages (32 percent), power (15 percent) and royalty (five percent).
It said profitability for the mining industry has declined across most minerals, with most respondents recording losses during the period under review.
Nickel recorded the largest loss of $1 393,00/ tonne in 2015 compared to a profit of $2 465 per tonne in 2014.
Platinum registered average loss of $529 per ounce (/oz) in 2015 compared to a profit of around $868/oz in 2014, while gold recorded average loss of $30/oz compared to a profit around $21/oz in 2014 with shortage and high cost capital, low commodity prices, shortage and high cost of power, high wage costs, high procurement cost (including erratic supply) and high and static royalty being cited as undermining viability of the sector.
All players indicated low levels of local content in their local procurement. The weighted average local content for the mining industry was at 13 percent as at end of 2015.
The survey was commissioned to bridge the information gap and provide leverage for Government policy as well as strategic planning for other key stakeholders that include mining houses, investors, financiers, suppliers, labour and communities.
