Mining sector poised for growth

HARARE - Zimbabwe's mining sector is poised to grow to $561 million by 2016 buoyed largely by positive performance of gold and platinum, an international report has shown.

Regarded as one of the fastest growing sectors in the economy, mining grew by 47 percent in 2009, 44 percent in 2010, 25,8 percent last year and could grow by 16 percent this year on the back of several investments in gold and platinum mines.

According to a fourth quarter mining report released yesterday by the Business Monitor International (BMI) Zimbabwe’s mining sector is set for rapid development as the country dramatically recovers from two decades of declining output.

Zimbabwe is richly endowed with deposits of chrome, gold, nickel and platinum, among other minerals.

Its gold reserves are among the largest in Africa, while it hosts the second-largest platinum reserves in the world.

BMI said although forecasting growth rates for the Zimbabwean mining sector is a highly uncertain process at present, with so much of the sector’s direction governed by political events, there is room for robust expansion.

“At base, we believe the scene is set for a period of strong growth, as the industry recovers from a disastrous period during the mid-2000s. The gold sector looks well-placed for growth, following its liberalisation in 2009, and thus we are forecasting a significant rise in gold output from 2011 levels, reaching 561koz in 2016, an annual average growth rate of 7,9 percent,” read part of the report.

The United Kingdom-based group forecasts similar strong rates of growth in platinum output, with annual average growth of 10 percent from 2011 levels.

“However, it is in diamond production that the country holds the most promise, having the potential to match the largest producers over the long-term,” said BMI.

Market observers feel that in the short-term there could be renewed weakness in mining sector output, as the country looks to introduce its indigenisation policy, which could see companies scaling down their projects or leaving the country.

“However, for the most part we maintain that despite this policy investment will continue to flow given Zimbabwe’s colossal mineral reserves.

“Taking the above into account, we expect the value of the mining sector to increase from 2011 levels of $420 million to $561 million in 2016. There are substantial risks to this view, both to the upside and downside, depending on the political situation,” read the report.

BMI believes that issues regarding the majority local ownership of mining assets remain the key challenge facing foreign mining companies operating in Zimbabwe.

In March 2011, the government committed to the continuation of its controversial indigenisation and empowerment policy, which calls for a 51 percent stake in all mining companies to be divested to indigenous Zimbabwean groups, with this new ownership structure to have been agreed upon by September 2011.

Reaction from foreign miners operating in Zimbabwe has been negative, with Canadian miner Caledonia Mining earlier stating that it will limit its spending in the country until there is further clarification about how indigenisation will be implemented. - John Kachembere

    Post a comment

    Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
    Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
    - Editor

    Your email address will not be shared.