'Mining prospects remain depressed'

HARARE - The Zimbabwe Chamber of Mines (ZCoM) will today launch its State-of-the-Mining Sector report, in the wake of the sector’s viability challenges.

ZCoM chief executive Isaac Kwesu on Tuesday told a news conference in the capital the report was coming in light of rising production costs with volatile international metal prices.

“Our industry is going through difficult times specifically against the backdrop of depressed prices. The majority of mining houses are struggling to break even,” he said.

Kwesu also said prospects for the industry remained depressed for 2016 and into 2017, but said the survey findings were to be announced today.

The ZCoM chief also said the sector’s viability had been compromised as the cost of production had remained static with costs going up.

“The weak international prices, which we have very little control over, have remained a great hindrance to growth.

“Members are also confronted with issue around government problems as blame is levied against them with government doing little to put in place measures to ensure compliance with certain expectations,” Kwesu said.

His remarks come in the wake of a World Economic Forum (Wef)  report released earlier this month warning all Zimbabwean mining companies to brace for a further plummet in commodity prices on the international market this year.

According to the report — despite having had a tough year in 2015 — commodity prices for everything, from crude oil to industrial metals such as iron ore and copper plummeted even further by the close of last week.

“The sector is contending with the lowest prices since the financial crisis, perhaps even this century.

“The situation was so dire that the Bloomberg Commodity Index, which covers a wide range of natural resources, dropped to its lowest level since June 1999,” the Wef report said.

The mining sector has recorded negative growth for two successive years at -2,5 percent in 2015 and -3,4 percent in 2014.

While Finance minister Patrick Chinamasa in his 2016 National Budget forecasted that the sector was going to grow by 2,4 percent in 2016 buoyed by increased output in  gold, chrome, coal, nickel, platinum and diamonds, the Wef says this is unrealistic.

The economic watchdog said countries like Zimbabwe which primarily depend on metal export earnings had to revise this year’s growth predictions, and issue conservative estimates.

Due to this situation, the world’s mining giants have been forced to restructure their business models in order to stay afloat as they battle declining profits.

The market capitalisation of the top 40 global mining companies fell by nearly $300 billion in 2015.

“The crash is particularly devastating for economies that rely on export earnings from commodities.

“The oil-producing states of the Middle East, Russia, Brazil and a number of African nations have all been badly affected,” Wef said.

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