THE CHAMBER OF MINES OF

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THE CHAMBER

OF MINES OF

ZIMBABWE

UNLOCKING ZIMBABWE’S MINERAL

WEALTH TO GROW THE ECONOMY

Unlocking Zimbabwe mineral wealth

Overview of the Mining Sector.

Contribution of mining to the economy

Performance of the Mining Sector.

Challenges facing the Mining Sector.

How to unlock the mineral wealth to maximize contribution to the economy.

Initiatives/ requirements to achieve intended growth objectives.

Unlocking Zimbabwe mineral wealth 2

Zimbabwe has over forty (40) recorded minerals occurrences.

Zimbabwe is under explored. The limited exploration done to date has not been using

modern technology.

There is therefore huge potential of new ventures arising from exploration activities.

Apart from a few gold mines, platinum, and diamonds in some cases almost all other mining companies are operating below capacity.

The last few years have witnessed a decline in production of most minerals.

The challenge of most of the producers is therefore to ramp up production to operate at full capacity.

There are plans by a number of producers to increase their capacity over the next five to seven years.


Zimbabwe’s mining sector plays an important role in

the socio-economic development of the country.

The sector has the capacity and potential to create

substantial impetus for economic growth and value

addition.

The sector’s contribution to the economy appears in several forms; inclusive of direct contribution to GDP, employment creation, foreign exchange generation, gross national investment, social infrastructure development and direct contribution to the government revenue.

In addition, the sector has direct and indirect linkages/ multiplier effects with other economic sectors such as manufacturing.


Facts on the ground reveal the mining sector currently constituting:

13% of nominal GDP,

50% of the nation’s total exports,

12% of fiscal revenue,

45,000 employment jobs,

more than 50% of foreign direct investment,

and significant corporate social investment in health, education, housing, and infrastructure.


The mining sector is anticipated to remain the major

driving force behind overall economic growth.

At 13% of GDP the mining sector is now matching

the manufacturing sector which now contribute 14%

of GDP (down from above 20% in 1990s)

If key challenges currently bedevilling the sector

such as inadequate capital and energy shortage are

overcome the sector can contribute as much as 18%

by 2015 and well above 25% in 2020, overtaking

agriculture and become the major anchoring sector

of the economy.


In terms of foreign exchange earnings per unit of GDP, mining generates the most foreign exchange of the economy.

The sector contribution to exports has increased significantly from 20% between 1993 and 2003 to 43% between 2004 and 2011.

In 2011 alone the sector contributed USD2.3billion to national exports, representing far above 50% of the country’s total merchandise exports and the country’s total foreign exchange earnings.


The sector continues to act as a magnet for investment in Zimbabwe, directly accounted more than 50% of total fixed investment and more than 75% of the total private sector investment .

If the multiplier effect is taken into account, mining helped generate about 80% of total investment in the economy.

The reason for the rise in the contribution of mining is the encouraging recovery in real mining output with more than $5 billion required by the sector in the next 5 years.


In 2011 the total tax paid by the mining sector to the government is estimated around US$340 million representing about 12% of the revenue collected by government for the year (2011).

If one incorporates alluvial diamond the contribution increase to around 18%.

Total tax paid to the government chunk approximately 17% of mining industry revenue and 60% of the sector’s profitability (effective tax).

At the expected future growth the mining sector contribution to fiscus can be as high as 22% by 2016.


The sector directly employed around 45,000 workers in 2011.

It is estimated that another 15 000 workers are employed in associated industries that either supply products to, or use products from the mining industry.

Around 500, 000 people are directly dependent for their daily subsistence on mine employees.


Key Minerals Driving Mining Performance

Gold

Platinum and associated minerals

Diamonds

Chrome

Coal

Iron Ore

Nickel

Asbestos


2010

Actual.

2011

Actual

2012 Proj

Gold/kg 9 620 12,992 15 000

Nickel/t 6 133 7,992 8 800

Coal/t 2 668 183 2,562,054 3 500 000

Chrome/t 516 776 599,079 750 000

Platinum/kg 8 639 10,826 12 000

Palladium/kg 6 916 8,421 9 600

Black Granite/t 169 318 168, 000 170 811


Power

Lack of Capital

Skills

Aligning wage increases to productivity

Perception on the contribution of the industry

Lack of exploration activities

Volatile prices

Implementation of the indigenisation regulations.


While the mining industry has great potential to grow and be many times its current size the current fiscal landscape continues weigh down the maximum output the sector can generate.

The sector is vulnerable to a myriad of taxes which currently chew about17% of mining revenue and around 60% of the sector profitability before tax.

The major concerns about the current fiscal regime are the indiscriminate or fragmented approaches by different government departments in levying charges to mining companies, high royalty rates and the unpredictability of the mining tax regime.

In the past three years (since 2009) the government has changed the royalty rates five times with royalty rates for gold and platinum going up by more than 100% and 200% .


Companies are at various stages of implementation to comply with the law.

It is important to formalise implementation modalities, which will be a general template for use by all companies

An implementation framework / template will give more confidence to the investing community.


If the above challenges are overcome the mining sector can sustain double digit growth rate in the next 5 years.

At those rate the sector will be growing above the average national economic growth rate.


Zimbabwe’s mineral potential can be achieved

through: Current producers operating at full capacity

Producers expanding current capacity

New exploration projects

To achieve the above mining industry (excluding diamonds) requires over US$5-7 Billion dollars in capital to optimize production over the next 5 years.

Of this figure Gold requires 33%, platinum 40%, diamonds 11%, coal 8%, Chrome 4%, nickel 4%.

If secured the minerals output for key sectors will grow phenomenally as shown below;


Mineral Minimum

Funding

Requirement

(US$ Bil)

2011

production

Expected

production by

2016

Gold 2.3 12,992kg 50 000kgs

Platinum Group Metals

2.8 10,826kg 21000 kgs

Ferrochrome 0.28 161,838 tons 262 000 tons

Nickel 0.28 7,992 tons 25 000 tons


VISION All stakeholders must have a common vision which must

enshrine the goals and objectives of Zimbabwe’s campaign to

develop and utilise its mineral resources.

Zimbabwe has the mineral resources Zimbabwe has the requisite skills

The question is how then do we attract capital for:

Exploration activities Companies to operate at installed capacity Companies to expand installed capacity

IT IS ONLY THEN THAT THE COUNTRY CAN REALISE THE POTENTIAL FROM ITS MINERAL RESOURCES.


Policy Consistency and Predictability

Competitive Fiscal Regime

Competitive Investment Environment

Mining Sector Administration Reforms

Sustainable Environmental Policy Framework

Mineral Development Policy and

Maximize mineral contribution through resource linkages

Promoting the development of a vibrant and sustainable small mining sector

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Unlocking Zimbabwe mineral wealth

21 Unlocking Zimbabwe mineral wealth

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THE CHAMBER OF MINES OF