According to Chamber of Mines of Zimbabwe (CMZ), there are over 4 000 registered chromite claims currently of which 46 percent are held by indigenous Zimbabweans while the remainder is held by five large scale mining companies.
ZIMASCO, Zimbabwe Alloys, Maranatha and Monawood as big players do have synergies with small scale operators, have smelting facilities and in most instances enter into tribute agreements for the chrome ore production on claims owned by large operators.
Last year in April, the Government banned the export of raw chrome to encourage the local beneficiation of chrome ore into ferrochrome before exporting.
This change in policy was effected without considering the existing smelting capacity, investment needed to increase capacity, any guarantee to cheap and uninterrupted power supply as well as lack of chrome reserves that can last for 10 to 15 years to justify the establishment of a smelter.
There was need for government to come up with a long-term solution to its power deficit of around 800 megawatts before implementing the policy.
Even the Parliamentary Portfolio Committee on Mines and Energy failed to appreciate the concerns and the quantum of funding required for the mineral of over US$280 million required to recover and grow over the next five years. The country's producers were also facing stiff competition from other producers, including South Africa and India who were operating much more viably.
The continued government stance on the ban of chrome ore is not achieving the desired objective. Instead it is reversing the gains previously achieved as the industry is on the brink of collapse.
Recently, ZIMASCO announced that it was facing viability challenges. As a result, it planned to scale down its operations by 40 percent. ZIMASCO has already shut down the West plant owing to viability challenges.
Some of the challenges include the over US$10 million ZESA debt which had resulted in the company being switched off, huge mining fees and taxes as a result small companies which do not have outside funding have gone under because of smelters failure to pay.
Zimasco, says its mining fee expenses have gone up more than 10-fold after government increased mining fees, ground rentals and levies by up to 5 000 percent effective January this year.
ZimAlloys has not been spared by the mining fee review as it is now required to pay US$1,5 million annually in mining fees and ground rentals for its 1 200 claims.
Other small to medium-scale chrome miners went under unnoticed. For example, Dakota Mining Company (Private) Limited recently succumbed to challenges bedevilling the sector. Dakota, was liquidated, put up its US$1 million worth of chrome ore deposits in the Mazowe area for sale.
The prevailing low market prices of US$1,25/lb from US$1,35/lb in the first quarter have compounded the challenges in the sector. As a result, this has affected the prices of raw chromium, which have averaged between US$165 and US$185 per tonne since August, from a peak of US$230 per tonne in May.
Zimbabwe's power costs which are arguably the highest in the region after government increased tariffs by 37 percent in September last year are prohibitive to new and viable beneficiation projects.
At an international level, chrome ores tend to move from countries with higher electricity costs to countries with lower or subsidised electricity costs as is the case with China, which has become a major producer of ferrochrome despite it not being a major producer of chrome ore.
Assuming that there was the capital available internally to beneficiate all chrome ore to ferrochrome, where would ZESA find the required power and at what tariff?
We are competing with new power suppliers across the world. One of them is Sarawak of Malaysia that has a new 20 000 MW hydropower which costs around US$0,04 cents per kilowatt hour.
An attractive ferrochrome business would entice producers to invest in their own competitive power capacity if funding permits. Investing in own generation was the norm elsewhere in the ferrochrome world. In India, those successful in ferrochrome have their own power plants. Zimbabwe needs to create the right investment climate that provides the right returns and the power plants will follow as well as value addition.
India was formerly the biggest exporter of raw chrome to China until the Indian government clam-ped down on raw ore exports to facilitate local beneficiation, action that the Zimbabwe government is now poised to emulate but it needs to guarantee availability of energy. Oman and Turkey are thinking of doing the same.
South Africa was the most appropriate location for ferrochrome production because of its vast reserves, but electricity, which currently represented 35 percent of the cost of production of ferrochrome in South Africa and labour costs, had gone up by much more than the 6,5 percent to 10 percent.
China was able to produce ferrochrome at a cheaper cost and faster. South Africa supplied half of China's raw chrome ore was proof that it was this country that had the critical mass to influence prices.