Pages

Saturday, August 22, 2009

New Zimbabwe Mining Minister Impatient To Get Mining Going Again

New Mining Minister ‘impatient' to get Zimbabwe going again
21st August 2009
TEXT SIZE
Text Smaller Disabled Text Bigger

New Zimbabwe Minister of Mines and Mining Development Obert Mpofu, by his own admission, is "impatient" to get mining going again in embattled Zimbabwe.

Mpofu came to address the fifth annual Omega Investments Mining in Africa conference, in Johannesburg and London, to give the message that he was a "man in a hurry" to create a "user friendly" legislative framework in Zimbabwe to encourage mining.

He told questioners that the hot indigenisation issue will be dealt with in the current session of Parliament and that he had handed it over to the Zimbabwe Chamber of Mines to turn into an aspect that would not put investors off.

The whole world has watched Zimbabwe go through a prolonged period of political instability, violent protests and the complete obliteration of the local currency and is now watching it making moves to rebuild the country's economy, in general, and the mining industry, in particular, in order to attract foreign investors to the country as an investment destination of choice.

Mining has played a central role in the economic development of a number of African countries. The economic development of South Africa, Zambia and the Democratic Republic of Congo is largely dependent on a sustainable mining industry.

In the past, Zimbabwe was viewed as an area of economic stability, with mining playing a central role. However, mining production has declined owing to lack of foreign investment into the country.

Since the installation of the government of national unity, where power is shared between President Robert Mugabe and Prime Minister Morgan Tsvangirai, the country is eager to rebuild its mining industry, as it is viewed as central to the country's economic development, and despite Mpofu being ‘a man in a hurry' and anxious to establish the groundwork for the rebuilding of the mining industry sooner rather than later, some believe that the time-frame in which this rebuilding process will take place may be longer than expected.

Engineering and scientific consultancy SRK Consulting's director and corporate consultant, Roger Dixon, reports that, judging by the number of projects that have been mothballed during the worst period of the decline of the mining industry, it will take the country a minimum of four to five years to get back to its former status.

"Freda Rebecca, one of the country's gold mines, has been mothballed for over three years now. It will take significant effort to ramp that project up to steady state, as the infrastructure around the project was deteriorating even before the project was mothballed," says Dixon.

He adds that two other obstacles need to be resolved, as matters of importance, before the country can rebuild.

The first of these obstacles is logistics. Dixon indicates that reports from the Beitbridge border post, the main border post between Zimbabwe and South Africa, show that trucks transporting mining equipment into Zimbabwe suffer delays of one day to five days. Similar delays are experienced at the Livingstone border post, between Zimbabwe and Zambia.

The second significant challenge that needs to be resolved is institutional infrastructure capacity.

"The country's mining industry has been operating at a low level for a number of years now and is used to this level. If there is a swift uptake in interest in the country and an influx of foreign mining companies into the country, does it have the capacity to cope with the increased mining activity?" asks Dixon.

POLITICAL LANDSCAPE CONCERNS

One of the biggest concerns associated with Zimbabwe has been the political stability of the country. Ever since independence, the country has been embroiled in a power struggle to see who will rule the country.

The situation has deteriorated significantly since the country's 2005 democratic elections that saw incumbent President Mugabe take control for an unprecedented fourth term in office.
In 2005, many had thought that Mugabe was at the end of his tenure at the helm of the country; however, in 2008, amid much speculation, Mugabe was re-elected President.

The 2008 election was the closest in the country's history, with rumours rife that Mugabe had actually lost, especially after the official polls indicated a first round loss to Tsvangirai. After a runoff, it was reconfirmed that Mugabe was President; however, following power-share talks, a government of national unity was established, with Mugabe as President and head of State, and Tsvangirai as Prime Minister.

While the political landscape in the country looks somewhat stable, significant concerns remain as to how long this stability will last. Reports from investment advisory firm Sace have warned against large-scale investment in Zimbabwe, citing expropriation, violence, economic risk and operational risk as reasons.

Institute for Security Studies senior researcher for Southern Africa Judy Smith-Höhnreports that Zimbabwe is something of a mixed bag in terms of a stable environment that will attract investors.

"On the economic side, a lot has changed over the past six months; however, on the political front, a lot hasn't changed. The main concern is the fact that Zanu-PF has violated key issues of the power-share agreement, namely in the appointment of political figures and the harassment of individuals on the basis of their political affiliation," says Smith-Höhn.

She adds that Zimbabwe is relatively stable with no immediate threat of the eruption of violence. However, she describes the country as a moving target.

"Investors going into the country should wait until the by-elections, which are to be held between September and October, to further assess the situation," says Smith-Höhn.

LOOKING TO THE FUTURE

Looking forward, there is significant interest in capitalising on a possible commodities boom in the country. Dixon reports that there are a number of Chinese and Indian companies that are prepared to expand into Africa. He adds that there will be significant interest expressed from South African mining majors.

However, the scope of these companies is not very clear. At the Mining in Africa Conference, Zimbabwe Chamber of Mines president Victor Gapare reported that the country was looking into establishing laws that would be based largely on South Africa's black economic-empowerment laws, which promote the financial development of locals over foreign nationals.

The exact composition of the indigenisation laws, and the outlook for their implementation, are somewhat vague as the chamber has been tasked with the establishment of the laws, based on similar laws from countries around the Southern African Development Community region.

A LAND OF PLENTY

Zimbabwe offers a plethora of opportunities for mining companies to increase their production targets, while adding significant value to the Zimbabwe economy.

Gapare paints an investment picture that illustrates the potential that Zimbabwe can offer potential investors.

"Zimbabwe has the second-biggest platinum orebody in the world; currently, there are two operating platinum projects with five additional projects being ramped up. The platinum orebodies in Zimbabwe are relatively shallow and offer mining at a low cost, which is attractive in the current economic crisis. It is estimated that, if Zimbabwe can reach its full potential, the country can produce in excess of one-million ounces of platinum a year for the next 15 years," says Gapare.

The country also has significant coal reserves, which are characterised by shallow reefs that offer coal of high quality. However, Gapare reports that the coal industry in Zimbabwe needs significant capitalisation if it is to be a sustainable industry. There are two major basins where the coal can be extracted, the Zambezi Basin, to the north, which runs into neighbouring Zambia and Mozambique, and the Sabi Limpopo Basin, to the south, which runs into the Limpopo province of South Africa.

Reports indicate that the potential of the region is significant. Estimated tonnage of in situ coal is 26 500-million tons, of which 10 500-million tons is extractable.

"If fully developed, this resource will make the Southern African region a coal-mining hot spot, similar to the copper-mining hot spot of Central Africa," reports Hwange colliery business development manager Oliver Maponga.

This would be the fourth significant coal resource in the Southern African region, the others being the Witbank coal resource, the Waterberg coal resource and the recently discovered coal resources in neighbouring Mozambique. The Zimbabwe coal resource is relatively shallow and easily extractable.

Average depth of the coal seams ranges from 10 m to 450 m. Currently, the only coal resource that has been fully developed is the Hwange colliery, in the north-western portion of the country.

Dixon adds that, in addition to platinum and coal, the country has significant iron-ore, chrome and nickel deposits that can offer value to investors.

Edited by: Creamer Media Reporter

No comments: