The Herald (Harare)

Zimbabwe: Mining Industry Leads Economic Recovery

ZIMBABWE'S mining sector has been the country's most active sector, leading economic recovery since 2009 with an average annual growth of 30 percent. Supporting this growth was the strong external demand for primary commodities, particularly platinum and gold. According to the Finance Ministry, mineral exports rose by 230 percent over the 2009- 2011 period, making the industry the leading export sector. Last year, mineral exports accounted for 47 percent of total exports, led by platinum, gold and diamonds.

Its contribution to the real domestic product also expanded from an average 10,2 percent in the 1990s to an average of 16,9 percent between 2009 and 2011, overtaking agriculture.

This year, the industry is set to decelerate from a 25 percent growth last year to 10,1 percent. This is because the country has been unable to fully benefit from high global prices by increasing exports.

Depressed investment inflows into the sector also affected the industry.

"In 2012, the sector was hard hit by slackening international mineral prices, particularly from the second quarter against the backdrop of the slowdown in global economic activity," said Finance Minister Tendai Biti in his 2013 Budget speech on November 15.

Gold output for nine months to October this year was 11,139 tonnes, which remains in line with the 2012 target of 15 tonnes. Diamond output for the same period for stood at eight million carats, against the projected annual output of 12 million carats. Platinum output stood at 8,224 tonnes against an annual target of 12 tonnes.

Sustained decline in platinum prices since November last year resulted in slowdown in expansion projects by Zimplats, the country's largest platinum mine.

The low uptake of chrome at the Zimbabwe Mining and Smelting Company processing plant for the first eight months to August saw chrome production decline significantly to 358 266 tonnes. The outlook for chrome production remains subdued on the back of unfavourable global prices. It this regard, chrome production has been revised from 750 000 tonnes to 420 000 tonnes this year.

High-carbon ferrochrome prices fell from an average US$131 per chromium pound in January last year, to current average level of US$107 per chromium pound.

This resulted in Zimasco, one of the world's leading ferrochrome producers and Zimbabwe's largest chrome smelting firm, closing down its five smelting furnaces.

Coal output is projected at 1,9 million tonnes, down from 3,15 million tonnes, weighed down by frequent breakdowns of plant and machinery at Hwange Colliery.

The downward revision of platinum output will also affect nickel production this year. This is because nickel is currently produced as a by-product of platinum. Nickel output for 2012 was revised downwards from 8 800 tonnes to 8 500 tonnes. In the first eight months to August, nickel production stood at about 6 100 tonnes.

However, the expected rebound of mineral prices coupled with ongoing investment in the sector and the resumption of production of nickel and asbestos next year will see growth rebound to 17,1 percent. Analysts say more companies were likely to shore up their investments given the fact that most of them have embraced the indigenisation policy, previously viewed as impediment to FDI.

"Mining will certainly grow next year," economist Mr Gift Mugano said in an interview yesterday.

"Several mining companies were taking an offensive approach to the indigenisation by adopting a wait-and-see attitude. Now that they have come to terms with the reality, there is nothing that should stop them from making further investments.

"Embracing the indigenisation policy means they (mining firms) are prepared to work in Zimbabwe."

Anglo America's local unit, Unki Mine, and Mimosa Mine -- a joint venture between Impala Platinum Mines and Aquarius -- have already submitted acceptable compliance plans.

Next year, gold output is projected to grow to 17 tonnes due to anticipated firming of gold prices. Diamond output is expected to increase to 16,09 million carats, largely driven by enhanced production from the mining firms in Marange diamond fields.

Platinum output is expected to rebound to 12,5 tonnes as a result of an anticipated increase in production of 10 percent by Zimplats. The planned recapitalisation programme at Hwange should result in coal output growing to 2,5 million tonnes in 2013.

The coal mining giant recently sealed a US$22 million supply credit deal with a Chinese mining equipment company Norinco. Nickel output is projected at more than 10 000 tonnes, mainly benefiting from anticipated resumption of production at Bindura Nickel Corporation's Trojan Mine. Milling would start in the first quarter.

Former Mines Minister Mr Edward Chindori- Chininga said growth in the mining sectors was "more certain" considering that there was a consistent position on indigenisation.

Ads by Google

Copyright © 2012 The Herald. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.