Mining sector seeks $5bn

HARARE - Zimbabwe's struggling mining industry requires at least $5 billion to revive its waning fortunes, the country’s Chamber of Mines has said.

The mining group’s chief executive, Isaac Kwesu, on Wednesday told a news conference in the capital that the industry was failing to attract new investments.

“Our industry remains fragile notwithstanding output growth, we still have a high-cost structure compared to other mining jurisdictions, the operating costs characterised by a high electricity tariff, expensive funding and sub optimal fiscal charges,” he said.

The mining sector — one of the most taxed industries in the country — has been recording negative growth for the past two years. The sector contracted by 3,4 percent in 2014 and 2,5 percent in 2015.

Industry experts, however, said it would be an arduous task for Zimbabwe to attract fresh capital due to controversial and inhibiting policies such as the Indigenous Act.

“If the new Mines and Minerals Amendment Bill, which seeks to bar resources firms with shares listed on foreign stock exchanges from acquiring mining rights in Zimbabwe, is passed into law, it would be difficult to attract deep-pocketed investors,” said a mining expert.

The Bill, which was gazetted in August not only bars investors holding mining titles in the country to dispose of stocks to foreigners without government approval once, but also sets tough conditions for the exportation of raw minerals and proposes up to 20 years imprisonment for investors who violate its provisions.

Once the Mines minister has approved the acquisition of shares in a domestic counter by a publicly listed mining company with majority of securities quoted on foreign bourses, 85 percent of funding raised would have to be invested in Zimbabwean mines.

Penalties meted on violators would include fines equivalent to the value of funds raised. This means if a company raises $50 million but violates the law, a penalty of $50 million would be charged against the investor.

The Bill also allows government to deny mining rights or title to a public company unless the majority of its shares are listed on a securities exchange in Zimbabwe.

Meanwhile, mineral revenue for the nine months to September 2016 remained flat at $1,38 billion compared to $1,34 billion with gold affirming its dominance as the country’s most contributing metal after accounting for 47 percent of the total earnings.

“The mining industry recorded mixed mineral output performance for the nine months to September compared to the same period in 2015 with key minerals such as gold, platinum and nickel recording significant output growth while diamond, chrome and coal on the contrary recorded significant output contraction,” Kwesu said.

Except for gold, whose average price in the nine-month period increased 6,8 percent, average prices for most minerals remained predominantly depressed, with average prices for platinum and nickel 9,6 percent and 27 percent lower than comparative periods, respectively.

“Gold output was up 13 percent to 16,1 tonnes, earning the country $648,6 million from $532,5 million last year.

“Platinum output has increased 20 percent to 10,8 tonnes from nine tonnes last year but revenues only grew four percent to $298,5 million as nickel output also rose 10 percent to 8,7 tonnes from 7,2 tonnes last year,” the Chamber boss said.

Diamond output slumped 37 percent to 1,6 million carats from 2,6 million carats recorded last year on the back of disturbances the sector recorded when government formed the Zimbabwe Consolidated Diamond Company, with revenue from the gems also declining 43 percent to $72 million.

On the back of viability challenges at Hwange Colliery Company Limited, coal output also nose-dived 36 percent to 1,9 million tonnes from 3,1 million tonnes.

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