11 January 2018

Zimbabwe: Miners Grapple Falling Ore Grades

ZIMBABWE'S mining industry, which government has identified as one of the cornerstones of economic growth and development, is facing an uncertain future as the average grade of mineral ore is deteriorating.

Mining experts told The Financial Gazette last week that despite the country's rich mineral endowment, there has been lack of investment to develop the mining sector, resulting in declining ore grades.

The sector has been the highest foreign currency earner with close to 70 percent contribution to total exports and accounts for more than 12 percent of the country's gross domestic product.

"The average (ore) grade for the mining industry declined across most minerals in 2017, compared to 2016. Average profitability (also) declined in 2017. (Most) mining houses that had made profit in 2016 made losses in 2017," a State of the Mining Sector report by the Chamber of Mines of Zimbabwe (CoMZ) has said.

It showed that average gold ore grade declined to 2,3 grams per tonne (g/t) in 2017 compared to 2,9g/t in the prior year while the ore grade for diamonds plunged to 7,6 carats per tonne (CPT) last year from 21,7 CPT in the previous year.

There are over 4 000 recorded gold deposits in Zimbabwe.

Zimbabwe is also known to host several kimberlites in Marange, a district in Manicaland Province, which is home to the Chiadzwa diamonds, whose economic and commercial viability is yet to be ascertained.

Alluvial diamonds have been depleted.

The country holds approximately 10 billion tonnes of chromite reserves on the Great Dyke, and Zimbabwe is estimated to host over 80 percent of the world's resources of metallurgical quality chromite.

While the chromite is mainly found along the Great Dyke, some podform deposits also exist outside the Great Dyke.

But the CoMZ report has revealed that chrome ore grades slumped to 48,9 chromium oxide (CR203) in 2017 from 51,9 (CR203) in 2016, while nickel posted a grade improvement to 1,89 percent in 2017 from 1,73 percent the previous year.

Platinum ore grades remained flat at 3,4 g/t.

Zimbabwe holds second place in the world with estimated platinum resources of 2,8 billion tonnes of platinum group metals (PGMs).

Zimbabwe also hosts large reserves of coal in the Lower Karoo formations of the mid-Zambezi Basin and the Save-Limpopo basins.

Over 29 coal localities are known with an estimated resource of more than 12 billion tonnes.

Previously, coal production was confined to the Zambezi Valley, particularly at Hwange Colliery but recently, there has been limited coal production from Sengwa coalfields near Gokwe, Mkwasine coalfield near Chiredzi and Tuli coalfield near Beitbridge.

Huge resources of coal bed methane gas has also been found within the coal basins and recent exploration wells indicate huge potential for commercialisation especially at Lupane.

Head of the mining department at the Zimbabwe School of Mines, Martin January said: "If you look at most mines in the country, the problem , generally, is the same; they have not invested in developing projects for a very long time, but have been trying to sustain operations.

"What you find is that they have plans to develop new deposits, but they don't have money to access new reserves and deposits. For nickel, the results of investing in the project are paying off now. Remember, Bindura Nickel Corporation closed and put its operations under care and maintenance. The company injected money into development, accessing or opening new areas with high grade ore."

Zimbabwe has more than 60 known minerals found in the famous Great Dyke, the ancient Greenstone Belts and the Karoo Basins, but the mining sector remains less diversified with activities in the industry predominantly concentrated on six key mineral categories, namely gold, PMGs, diamond, nickel, chrome and coal, accounting for 97 percent of the value of minerals generated in 2017.

Besides low mineral grades, there are now severe foreign exchange shortages, less and high cost capital, lower appetite from lenders, high procurement costs which include erratic supply, low commodity prices and suboptimal fiscal charges.

Feeling the pain of mineral ore grade drop and other challenges, many mining companies have shed off assets; high profile example being Falcon Gold Zimbabwe, which recently sold its Dalny Mine to RioZim.

Many others have been attempting to manage debt and shedding non-core assets as part of a broader streamlining and consolidation efforts.

This is further evidenced by a significant drop-off in capital expenditure in most mines, signalling an almost stagnant investment environment.

Almost all mining companies have failed to proceed with planned new mine developments in 2017, mainly due to funding constraints, according to CoMZ.

Realising that it was no longer economically viable, most mining companies in the country have been forced to put facilities under care and maintenance due to viability challenges.

The mining sector requires huge amounts of capital. The mining industry last year injected about $211 million for both sustenance and ramp-up.

But, the industry requires about $393 million this year to sustain operations.

Zimbabwe remains underexplored with only 60 percent of the country having been mapped.

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