Resurgent mining sector eyes US$2,6 billion

21 Jan, 2018 - 00:01 0 Views

The Sunday Mail

THE mining sector is expected to grow 6,1 percent and generate about US$2,6 billion in export receipts this year buoyed by a combination of investor friendly policies and solid performances in gold and platinum group of metals categories.

The Chamber of Mines of Zimbabwe says miners are expected to record an “output boom” this year, amid indications several miners are planning to scale up capital investments, and consequently, output by more than 10 percent of last year’s capacity.

Capacity utilisation averaged 71 percent in 2017, compared to 64 percent in the prior year.

Investor confidence is rising significantly following sweeping changes to investment laws by the new Government led by President Emmerson Mnangagwa.

Previously, the most toxic investment law, the Indigenisation and Economic Empowerment Act, has literally been set aside, with its contentious 51-49 percent shareholding requirement in locals’ favour now applicable to the diamonds and platinum sectors only.

However, investors wanting to set up beneficiation plants for diamonds and platinum are free to own their businesses 100 percent.

Last year, export receipts topped US$2,3 billion and the mining sector – which has become a top foreign currency earner – is expected to rake in an additional US$300 million this year.

Chamber of Mines economist Mr Pardon Chitsuro told The Sunday Mail Business last week that the mining sector would grow 6,1 percent this year, underpinned by gold and platinum group of metals.

“This year we anticipate that mining export receipts will be between US$2,5 billion and US$2,6 billion. The growth will obviously be driven by gold followed by the platinum group of metals,” said Mr Chitsuro.

The Chamber of Mines’ forecast is not too different from the one proposed by Finance and Economic Planning Minister Patrick Chinamasa in the 2018 National Budget.

Minister Chinamasa projected mineral export receipts of US$2,5 billion this year.

Gold has become the star mineral in the country, almost single-handedly providing the foreign currency requirements for the country. As at September 30 last year, gold revenues stood at US$682,6 million while platinum was at US$658,2 million and ferrochrome a distant third on US$236,1 million.

Last year, Zimbabwe hauled 24,8 tonnes of gold driven by small-scale miners who delivered 51 percent of the tonnage to Fidelity Printers and Refiners, the country’s sole gold buyer.

The output surpassed the 24,5 tonnes target set for the year and, crucially, it was 1,8 tonnes more than the 23 tonnes delivered in 2016. The 2017 State of the Mining Industry Survey report compiled by the Chamber of Mines reveals that investor confidence is high, mainly due to changes brought about by the new administration.

According to the survey, all the 12 indicators, which include Mining Business Confidence Index (MBCI); growth prospects; access to capital; the economic prospects confidence; the profitability prospects confidence; consistence and predictability of mining policies and perception on political risk, have improved for this year.

MBCI, an important barometer that measures business optimism or pessimism about the mining industry’s prospects, is 21,9 this year compared to -6,6 percent recorded last year.

The 2018 MBCI is based on sentiments of mining executives and investors.

“The new index shows that respondents are bullish about the prospects of the mining industry in 2018 given the new political dispensation, with the majority of respondents (90 percent) optimistic that the new Government will endeavour to resolve all legislative and policy bottlenecks affecting the mining industry,” reads the mining sector survey.

This year, the economic prospects confidence indicator is at four compared to -50 recorded for 2017, indicating overall optimism about the economic prospects for the year.

Survey findings show that 90 percent of respondents are optimistic of positive economic growth in 2018, with about 70 percent expecting the economy to grow by over 5 percent.

The remainder anticipates an economic growth of between 1 percent and 5 percent. The profitability prospects confidence indicator for 2018 stands at 18 percent compared to 11 percent recorded in 2017, suggesting strong optimism of profitability of mining businesses in 2018.

Seventy percent of respondents anticipate profits in 2018 and 20 percent expect break-even, with only 10 percent anticipating to record losses. The growth prospects index for the mining industry is a 78 compared to 50 recorded last year, showing that the sector is aiming to record strong growth in 2018, compared to last 2017.

“. . . 90 percent of respondents anticipating the industry to grow by more than 10 percent while the rest are of the view that the industry will post a moderate output growth,” reads the mining sector survey report.

So high is the confidence among miners that 70 percent of respondents are hoping to increase the number of employees this year while 30 percent intend to maintain last year’s headcount levels.

Similarly, about 90 percent of respondents are planning to spend on capital projects.

Indications are that the sector has increased its capital requirements by 53 percent to US$392 million as they seek to boost production.

Many miners are of the perspective that the conclusion of the doing business reforms will significantly improve the investment climate for the country.

Zimbabwe improved on the World Bank Doing Business rankings to 159 last year from 160 in the prior year due to the reforms and it is hoped that as results of more reforms kick in, the rankings will improve this year.

Last Thursday, President Mnangagwa reiterated that the country is open for business, adding that investments from across the world are welcome.

Zimbabwe has over 60 internationally tradable minerals with the top nine being gold, platinum, chromite, coal, nickel, diamonds, iron ore, copper and coal bed methane. The estimated gold resource is 13 million ounces with about one million having been mined since 1980; platinum (2,8 billion tonnes); chromite (930 million tonnes); coal (26 billion tonnes); nickel (4,5 million tonnes); diamonds (16,5 million tonnes); iron ore (30 billion tonnes) and copper (5,2 million tonnes).

Coal bed methane is still being explored. lt is believed Zimbabwe has the largest known reserves in Southern  Africa.

The mining sector had contributed 68,1 percent to total exports by September 30 last year.

 

 

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