Overview of Zimbabwe’s Mining Sector

ALEX MHEMBEREPRESIDENT

CHAMBER OF MINES OF ZIMBABWE

THE CHAMBER OF MINES

OF ZIMBABWE

Presentation Outline• Zimbabwe’s mineral resources

• Contribution of the mining sector to Zimbabwe’s economy:

Where have we come from?Where are we now?

• Where to for Zimbabwe? Mining as the cornerstone for economic growth

• Conclusion

Mining Sector Overview

THE CHAMBER OF MINES

OF ZIMBABWE

“The mining sector will be the centrepiece of our economic recovery and growth. It should generate growth spurts across sectors, reignite that economic miracle which must now happen…we need to explore new deposits, developing new greenfield projects in the mining sector. Above all, we need to move purposefully towards beneficiation of our raw minerals.” President R.G. Mugabe inauguration speech

4

Importance of the Mining Sector

• More than 40 different minerals

• Diverse mining sector

• +800 operating mines

• Ranging from artisanal and small scale mines to world class mines

5

Structure of the Sector

Contribution of the Mining Sector to Zimbabwe: Where have we come from?

THE CHAMBER OF MINES

OF ZIMBABWE

• The mining sector has to date been the most dynamic sector of the Zimbabwean economy, leading the 2009-2011 rebound with average annualised growth of 35%.

Aug 2013 7

Mining, the Driver of Economic Growth

Value of Mineral Exports

1980 1990 1996 2000 2005 2006 2007 2008 2009 2010 2011 20120

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Value of mineral exports (1980- 2012)

mining exports (USD million) national exports (USD million)

Positive correlation between export growth and mineral export growth

  Contribution to Total Mineral Exports

1993-2003 (%) 2004-2011 (%) 2012 (%)

Gold 57.3 24.2 26.9%

HCF 20 10.7 8.6%

Nickel 15.1 11.0 0.7

PGMS* 2.3 46.1 27.2%

Diamonds 0.8 6.7 26.1%Others 6.8% 1.3% 10.5%

9

RBZ, MOF, Zimstats

Exports by Category

10

Gold Price vs. Zimbabwe Production

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.0

5000.0

10000.0

15000.0

20000.0

25000.0Zimbabwe Gold Output (kg)

Output (kg)

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120500

100015002000

Gold Price (USD/oz)

Avge Global Price (USD/oz)

USD

11

Nickel Price vs. Zimbabwe Production

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.0

2,000.0

4,000.0

6,000.0

8,000.0

10,000.0

12,000.0Zimbabwe Nickel Output (t)

Zimbabwe Output (t)

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

500010000150002000025000300003500040000

Nickel Price (USD/t)

Average Global Price (USD/t)

USD

12

Coal Price vs. Zimbabwe Production

2003 2004 2005 2006 2007 2008 2009 2010 2011 201201020304050607080

Coal Price (USD/t)

Average Global Price (USD/t)

USD

2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

500,0001,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,000

Zimbabwe Coal Output (t)

Zimbabwe Output (t)

Contribution of the Mining Sector to Zimbabwe: Where are we now?

THE CHAMBER OF MINES

OF ZIMBABWE

14

Mineral 2012 Actual

2013 Jan-June

Actual

2013Projection

Gold (kgs) 14,742 6,727.36 17,000Coal (tons) 1,784,763 955,086.00 2,000,000

Nickel (metric tons) 7,899 4,887.33 10,000Platinum (kgs) 10,524 6,599.49 12,500Chrome Ore (tons) 408,475 92,073 282,000

Palladium (kgs) 8,136 5,068.54 10,000Diamonds (tons) 12,014,802 - 16,900,000

Source: Ministry of Mines, Chamber of Mines

• Mineral output for 2013 expected to surpass 2012 production

Mineral Output Performance

Aug 2013 15

1995 1996 1997 1998 1999 2009 2010 2011 2012 2013f 2014f 2015f

4.30%3.80% 3.70% 4.00% 3.90%

8.00%

12.00%13.00%

15.00%15.70%

16.90%17.80%

Mining Contribution to GDP (1995-2015)

GDP Contribution

Aug 2013 16

Direct Tax Contribution

2009 2010 2011 2012

57,800,000

167,523,764

387,300,000

445,000,000.00

Total Tax Paid Directly by Mining sector to government ($)

People Employed in the Sector

Aug 2013 17

1990 1995 2000 2004 2006 2007 2008 2009 2010 2011 20120

10000

20000

30000

40000

50000

60000

70000

51000

59000

45000

39000 38516 37971 38616

33289

45918 45200 45800

Employment in the Mining Sector

• Contribution of mining companies goes beyond paying taxes• Towns and cities have been built around mines (e.g.Bindura,

Hwange, Kwekwe and Zvishavane)• New local enterprises have been developed through linkages to

mining operations• Schools and hospitals have been established by mines

July 2013 18

Corporate Citizenship of Mining Companies

• Sports teams have been established by mining companies (e.g. Hwange FC, FC Platinum)

Where to for Zimbabwe? Making Mining the Cornerstone of Economic Growth

THE CHAMBER OF MINES

OF ZIMBABWE

With the new thrust of mining as the cornerstone of economic growth, it’s imperative to:

1. Resuscitate existing mining operations

2. Develop new mines

3. Beneficiate mineral output

4. Establish linkages between the mining sector and other sectors of the economy, particularly manufacturing

Making Mining the Cornerstone of Economic Growth

Gold Production (kg), 1980-2012

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

5000

10000

15000

20000

25000

30000

Source: COMZ 2012 and RMG 2012

Resuscitation of Existing Mines

Resuscitation of Existing MinesCoal Production (tonnes), 1980-2012

Resuscitation of Existing MinesNickel Production (tonnes), 1990-2012

Resuscitation of Existing Mines

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- Capital - Knowledge - Innovation

Feasibility Studies• Exploration & evaluation• Design, planning & costing

Shaft sinking• Drill, blast, clean, support• Equip

Development• Footwall off-reef and on-reef• Drill, blast, clean, support

Stoping• Drill, blast, clean, support• Underground rail transport

Transport• Shaft hoisting• Surface rail transport

Concentrator• Mill• Flotation

Smelter• Drying, smelting• Converting

RefineriesRequired for all

Stages

Development of New Mines

The Chamber of Mines is in full support of the Government’s call for beneficiation of mineral output

1. Down-stream beneficiation - Downstream value addition involves a range of activities including large-scale capital-intensive activities such as smelting and refining as well as labour-intensive activities such as craft jewellery and metal fabrication.

• Mining beneficiation – capabilities of the mining company in the areas of smelting or concentration

• Manufacturing beneficiation – when manufacturing companies have capabilities to produce a final consumer product

2. Side-stream beneficiation - Refers to inputs, namely capital goods, consumable and services, into the value chain

Supported by mining companies in Zimbabwe as well as policy makers

To a large extent, mineral beneficiation is already taking place in the country

Beneficiation

There will be a picture of the mine here

Manufacturing beneficiation took place with the manufacture of asbestos cement products

Between 1965 and 1978 asbestos was the country's principal mineral in terms of the value of output

Production peaked in 1974 at 281kt. 2012 production was 29.5tonnes.

Shabanie and Mashaba Mines have been operating below capacity

Asbestos Beneficiation

Beneficiation in chromite mining has been taking place through the production of ferrochrome

Production: 2012 production was 31.82% down on the previous year at 408,475.81 tons.

Most of the smaller smelters remained under care and maintenance during 2012, with ZIMASCO being the only smelting facility operating

Chromite Beneficiation

There will be a picture of the mine here

Mining beneficiation is taking place with the use of coal in power stations

Most potential in the sector has remained under-utilised

Production averaged over 5mt/yr in the 1990s but fell to 1.9mt in 2009 before recovering to 2.8mt in 2010 and 4.6mt in 2011

Hwange Colliery Company continues to be the largest coal producer with additional production coming from Makomo Resources and Galpex.  

Coal Beneficiation

Mining beneficiation for gold mining has been taking place through Fidelity Refiniries

Production has rapidly recovered to 14.7tons in 2012 compared to 3.6 tons in 2008 since adoption of the multi-currency system in 2009, production

Artisanal and small scale miners play a large role contributing to gold output

Gold Beneficiation

There will be a picture of the mine here

Mining and manufacturing beneficiation used to take place for iron ore mined at Ripple Creek and Steel produced in Redcliff

Production peaked in 1992 at 1.46 Mt, and then fell to zero in 2008

Iron and Steel Beneficiation

There will be a picture of the mine here

Mining beneficiation took place at the Bindura Smelter and Refinery complex

Bindura Nickel Corporation, the primary producer for nickel placed its smelter and refineries on care and maintanence in 2008

For the past 4 years, most nickel production has been from platinum mining operations as a byproduct.

Production: Peaked in 1994 at just over 13,000 tonnes

Nickel Beneficiation

Three operating mines in Zimbabwe; - 2 producing concentrate- 1 producing matte after smelting

Potential exists for further beneficiation and work is already in progress in this regard

Platinum Beneficiation

• It’s critical that linkages with other sectors are created, especially manufacturing

• Zimbabwe’s manufacturing sector has been hamstrung over the past 15 years, therefore capacity for manufacturing beneficiation is limited

Building Linkages

Leath

er an

d Allie

d

Grain

Millers

Car A

ssem

blers

Paints

and I

nks

Textile

s and

Clot

hing

Engine

ering

Iron

and S

teel

Baker

s

Chemica

l

Electric

App

lianc

es M

anufa

cture

rs

Plastic

, Pac

kagin

g and

Rub

ber

Timbe

r Pro

cess

ors

Pharm

aceu

ticals

Food,

Dairy a

nd B

ever

ages

Paper

, Prin

ting a

nd pu

blish

ing

Buildin

g (co

nstru

ction

and r

elated

)

Batter

y Man

ufactu

re0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

2012 Capacity Utilisation in Zimbabwe Manufactur-ing

Level of utlisation

Source: CZI State of Manufacturing Survey,

Capacity Utilisation in Zimbabwe Manufacturing

Case Study: Building Linkages

July 2013 36

Prospects for the Mining Industry

THE CHAMBER OF MINES

OF ZIMBABWE

Despite constraints, the sector is poised for marked growth in the next 5 years with World Bank (2012) forecasting positive outlook under two scenarios:

1. Base Case ( current policies and costs)• Gross revenues and fiscal revenues of the mining sector to increase by

63 and 87 percent in 2018, respectively, to $4.8 billion and $729 million.

2. Optimistic Case ( assumes investment capital of around $5 billion and optimal policies)• Gross revenues and fiscal revenues of the mining sector to increase by

274 percent and 307 percent in 2018, respectively, compared to 2011.• The increase in gross revenues and fiscal revenues compared to the

base case projections for 2018 are 130 percent and 118 percent, respectively

Future Prospects for the Mining Industry

Conclusion

THE CHAMBER OF MINES

OF ZIMBABWE

- Zimbabwe is endowed with abundant mineral resources- indeed mining can become the cornerstone of an economic turnaround- We need to resuscitate existing mines on care and maintenance to pre-

1998 levels- We need to invest in exploration and new mining development- We need to focus on value addition and beneficiation- We need to focus on linkages

To achieve this, we need to address the following issues:- A common national vision- Policy consistency. Mining Policy in progress. To now focus on

economic & Industrial Policies. - Competitive fiscal regime - We need to attract investment to the sector - Improve critical infrastructure, i.e. electricity, roads and water supply

Conclusion

ENDSThis presentation based on personal views of presenter and does not necessarily represent the views of the Chamber of Mines of Zimbabwe or any other person or

organization

THE CHAMBER OF MINES

OF ZIMBABWE