SA’s mining loss is Zim’s gain
Platinum mining unrest in South Africa has lead to a boom in Zimbabwe’s mining sector.
Mining, a key driver of Zimbabwe’s economy, is expected to play a leading role in next year’s projected 7.4% economic growth rate forecast by Tendai Biti, the finance minister, who will present his 2013 budget to Parliament on Thursday.
Eric Bloch, a senior economist from H&E Bloch consultancy, said: “Investors are shunning South Africa because of the strikes and the high level of uncertainty. Zimbabwe will become the natural choice as it holds the second-largest known platinum reserves in the world and there is increased demand for our platinum. This is certain to reflect in the financials of the mining companies.”
Despite concern over the country’s indigenisation law, which compels foreign-owned companies to concede a 51% indigenisation stake to locals, mining companies have not been put off and continue rolling out plans to increase production.
South Africa’s Impala Platinum subsidiary in Zimbabwe, Zimplats, is carrying out a $300 million (R2.6 billion) expansion drive at its Ngezi mine, southwest of Harare, which will increase production to about 270 000 ounces from the current yearly production of 187 000 ounces.
Mimosa platinum mine, a Zimbabwean joint venture project between Aquarius Platinum and Impala Platinum, is in line to record 204 000 ounces of platinum this year, a marginal increase from last year’s 202 000 ounces.
Winston Chitando, the MD at Mimosa, said: “We are expecting to produce 204 000 ounces compared with 202 000 ounces last year.”
Mimosa mine is undertaking feasibility studies for the expansion of its operations.
Kipson Gundani, an economist from the Zimbabwe National Chamber of Commerce, said: “The spin-offs for Zimbabwe’s mining industry as a result of the worker unrest in South Africa are huge, but that has to be backed by the right climate to support the mining sector.”
Zimbabwe this year increased mining royalties for platinum from 5% to 10% and for gold from 4.5% to 7%.
Bloch cautioned that any “nasty surprises” in the budget presentation by Biti for the mining industry would reverse the marginal gains it had recorded under the three-year- old unity government.
The African Development Bank has warned that “any further increase in royalties can result in a fall in production as those firms mining in low-grade ores will be faced with an increase in the unit cost of production.”