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Mine expansion plans in Zim under threat

Harare – Mine expansion plans for companies in Zimbabwe and the growth of the crucial industry is now under threat because of continued depressed metal prices and spiking government demands for more revenue, executives and mining experts in the mineral rich southern African country said on Tuesday.

Zimbabwe has vast mineral riches spanning gold, platinum, nickel, chrome, diamond and coal among others. These mineral riches have attracted global investors such as Rio Tinto, Anglo Platinum [JSE:AMS], Impala Platinum [JSE:IMP] and Metallon Gold [JSE:].

However, the mining companies in Zimbabwe, which are also required to give up majority shares to black locals under an empowerment drive, are beginning to feel the squeeze from higher taxes, rising fees and softer commodity prices. Experts and executives in the country say this is now dimming investment prospects into expansion projects.

“Depressed international prices, high utilities costs and high levels of taxes,” Walter Nemasasi, the manager at Anglo American Platinum’s Unki mine in Zimbabwe said.

Unki is the third largest platinum mine in Zimbabwe after Zimplats, owned by Implats and Mimosa, which is jointly controlled by Implats and Aquarius Platinum [JSE:AQP]. In the full year to December 2014, Unki mine produced 60 000 ounces of platinum compared to 67 000 ounces in the year earlier period.

Mining executives in Zimbabwe say Unki’s plans to ramp up production are now under serious threat because of constraints the company is facing. Platinum miners in Zimbabwe are threatened with a 15% levy on exports of platinum that is not beneficiated unless they built a refinery inside the country.

“The whole planning purpose has been disturbed by developments on the ground. We still have to see whether the expansion plan will still be approved to increase mining sections to 20 and go deeper in terms of the mining profile,” a source at the mine said.

Rio Tinto’s partner in the country’s Murowa diamond mine said on Tuesday that it is expecting a loss for the full year to the end of December 2014 owing to softer metal prices. “In the second half of the year, gold production at Renco mine decreased marginally by 0.5%. The production was adversely affected by lower than anticipated tonnages and ore grade,” RioZim said.

Chamber of mines of Zimbabwe chief executive officer, Isaac Kwesu said the representative grouping was in constant discussions with the government over the operating environment. However, other mining executives told Fin24 off the record that the government was increasingly demanding more from mining companies that are already undergoing pressure from rising mining costs unmatched by softer mineral prices.

“Demands for a refinery and high royalties will make mining in Zimbabwe unsustainable. The government should incentivise mining investors to grow their operations and not demand more because they will simply not approve expansion programmes,” said the CEO of a mining company in Zimbabwe.

Zimbabwe Mines and Mining Development Minister, Walter Chidakwa has said that he is holding discussions with Finance Minister, Patrick Chinamasa over the issue of mineral royalties.

 

Source – Fin24