Friday, October 1, 2010

Zimbabwe mining sector seen growing 31% in 2010

September 17, 2010 -- I-Net Bridge

Zimbabwe's mining sector is expected to grow by 31 percent in 2010, Desiree Sibanda, the country's Economic Development ministry permanent secretary says.

Speaking at Zimbabwe's second mining indaba in Harare, he also said government had prioritised expunging its nearly USD6 billion debt overhang in order to enhance its credit rating and Harare was pinning its hopes on medium term plan (MTP) to earn USD9 billion by 2015.

Government was intent on value addition to its mineral resources and has held regional roadshows in Malawi, Mauritius and Rwanda to learn how best to attract foreign direct investments.

Acknowledging the problems besetting the country's mining sector, Sibanda, however, reiterated Acting Mines Minister Saviour Kasukuwere's statements that government was on a path to reviewing the current mining taxation regime.

Mining royalties in Zimbabwe are going up from 3.5 percent to 4 percent effective October, Metallon Zimbabwe chief operating officer Shadreck Mashingaidze told the conference.

Metallon, owned by South African magnate Mzi Khumalo, is Zimbabwe's largest gold producer with its five mines, but like most players it is also beset by a myriad of operational problems.

As well as confirming an earlier statement and hint by Kasukuwere that 'the current budget taxation policy is not effective', Mashingaidze, said this fiscal drive would further dampen the key sector's investment outlook.

This also comes at a time the industry is battling power and capital shortages, among other challenges, which have also seen Zimbabwe ranking lowly in key mining benchmarks such as the latest Fraser Institute Report (FIR).

On all the six key perception indices or FIR focus areas such as legislation, skills availability and taxation, Zimbabwe averaged second from last out of 72 destinations, Allan Dolan, managing director of London-based Clarity Capital said.

The conference was also told that Zambia based Copperbelt Energy Corporation (CEC) is partnering Utho Capital to build power stations for Zimbabwean mines, according to its corporate development managing director Michael Tarney.

Apart from Utho, CEC has also roped in South African based Aldwych and the Development Bank of Southern Africa to fund 10 regional projects.

Tarney told the mining summit, however, that projects would be undertaken strictly on 'credible off taker agreements', although the mines are 'usually bankable accounts' themselves.

In Zimbabwe in particular, the company hopes to deliver projects worth USD4.3 billion by 2015 and these include diversified miner RioZim's 1 400 megawatt Gokwe north project, Hwange's expansion to 600 MW, and the costly Kariba south station at 300 MW.

The company is also targeting smaller thermals in the Bulawayo and Harare metropolitan areas as well as the remote Munyati.

The CEC boss further noted that the problem with the current Zimbabwean projects is timing because mines requiring energy now may not be able to access it until plants such as Gokwe are erected in two or three years.

Zimbabwe's erratic power supply has been a major headache for business owners.

Rolling blackouts of up to 18 hours have frequently plunged many factories and homes into darkness, as demand of 2 200 MW outstrips local generation capacity at 1 240 MW, the Zimbabwe Electricity Supply Authority (ZESA) chief executive Ben Rafemoyo said. With no capacity - at both state and company level - to improve this situation, Harare has issued a 'tariff model' of up to US0.13 to US0.15 cents per kilowatt hour in bids to encourage independent power producers (IPPs) to invest in the sector.

To date, private investors such as the Impala Group owned Zimbabwe Platinum Mines has invested in its own USD24 million plant to power its Selous operations, a model SAPP analyst Musara Beta said was the only way to go since Zimbabwe could not even access electricity under its day ahead market (DAM) auction facility.

Beta said the region has a pipeline of projects worth USD5.6 billion to add 20 720 MW by 2015 - with Zimbabwe gaining 150 MW next year - and a more ambitious plan of building 57 000 MW in 15 years through a capital injection of USD83 billion.