THE Chamber of Mines of Zimbabwe (CoMZ) has said the softening international mineral prices is threatening the viability of the sector, in a major setback to the US$12 billion mining revenue target by year end.
In 2019, President Emmerson Mnangagwa’s administration set a US$12 billion revenue mining target for the sector by the end of this year, reliant on increased government support and investor outreach.
In its 2022 annual report, CoMZ said the mining sector would miss its US$12 billion revenue forecast by about 42% on high expenditures, power cuts and forex challenges.
This comes as global consultancy firms expect international mineral prices to fall due to a slowdown in China’s economic growth due to a mortgage problem, a drive away from carbon processes and geopolitical concerns.
CoMZ said that weaker mineral prices were beginning to weigh down the viability of mining projects in the sector.
“Over the past 12 months, the mining industry has witnessed softening of prices for most key minerals, with rhodium (-74%), lithium (-69%), palladium (-41%), diamond (-60%) and nickel (-8%) the most affected,” the Chamber said yesterday.
“The prices are coming down at a time the cost structure for the mining industry has increased, propped up by high electricity which went up by more than 40% in the last 11 months. The situation has been compounded by recent increases in royalty for platinum and lithium. Also in the past 11 months, royalty for platinum was increased by 180% from 2,5% to 5% while that for lithium was increased by 150%, from 2% to 5%.”
CoMZ said the challenges had severely weighed down on the viability of mining projects with affected mining companies reporting that their overall cost has increased by more than 10%.
“While mining companies have tried to reduce their costs through various strategies including cutting back on capital expenditure and optimising their businesses, the viability gap is so huge that only with Government intervention in the form of electricity tariff and royalty reduction that viability can be restored,” it said.
The Chamber’s statement comes barely a week after Mnangagwa said in his State of the Nation Address that the mining sector had grown to US$12 billion from US$2,8 billion in 2017.
The mining sector is Zimbabwe’s biggest foreign currency earner. The capital-intensive sector has been scrounging for capital to up production. – (Newsday)