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Zimbabwe wants more from lithium wealth, but also wants to keep investors happy

Zimbabwe’s lithium exports surged by 854.7% from 2022 to 2023, rising from US$70.6 million in 2022 to US$674.0 million last year.

Zimbabwe is desperate to get more out of its lithium wealth, but the country is also trying to strike a balance to keep investors happy.

The country enjoyed a rush of lithium investments two years ago, as prices of the metal used in electric vehicles firmed. But this has slowed over the past year, after prices fell by as much as 80% due to weak demand.

But another reason for the slowdown is Zimbabwe’s own policies, at least according to one of the main investors. This includes new tax measures announced in the 2024 budget, says Gong Xuedong, the MD of Bikita Minerals, one of the largest lithium producers. Government sees this differently, saying these measures are necessary to get more value from the mineral.

“Fiscal policies need to strike a delicate balance. While ensuring that the nation benefits fairly from its resources, we must also create a conducive environment that encourages investment and innovation,” Gong says.

Helped by new projects, Zimbabwe’s lithium exports surged by 854.7% from 2022 to 2023, rising from US$70.6 million in 2022 to US$674.0 million last year. For Zimbabwe to sustain this, Gong says, the country needs “clarity and stability in taxation policies (to) instil confidence and encourage long-term investments in value addition initiatives”.

Bikita Minerals has invested US$200 million into the mine after parent company Sinomine bought the operation for US$180 million in a deal with African Metals Management Services and German investor Wilfried Pabst’s Southern African Metals and Minerals, the Mauritius-registered companies that held a combined 74% of the mine.

This was one of several lithium deals amounting to a total of US$1 billion that large global metal companies have done in Zimbabwe. Another transaction involved Huayou Cobalt, one of the world’s biggest mining firms, buying Arcadia mine from Prospect Resources, an Australia-listed company, for US$422 million. Seeing these offshore deals, the government wants a cut from the transactions. Finance Minister Mthuli Ncube has imposed capital gains tax on such deals.

“Whereas transfer of a mining right is a sale that should attract Capital Gains Tax, this has, however, not been the case, since assets are transferred without the knowledge of ZIMRA,” Ncube said. A company must now also get government approval before selling their mining lease to a new investor. But, according to Gong, this is an “imposition of unfair special capital gains tax”.

In the 2024 budget, Ncube also introduced a new 1% levy on turnover on the sale of lithium, granite and uncut gemstones. This money will be “ring-fenced for community development of the area where the mining operations transpire”, Ncube said. But Gong argues that miners already pay a levy to local authorities. The “new community levy (is) despite an existing mining levy paid to the Rural District Councils, resulting in in double taxation”, he says.

Currently, lithium miners process lithium ore into concentrates for export. Raw lithium exports were banned in 2022. The government now wants lithium firms to go a step further than concentrates and process lithium into battery-grade carbonates. This is a good idea, Gong says, but “the drop in lithium prices hinders the plans for value addition”, he adds. He proposes incentives for value addition and tax holidays, which government is unlikely to give.

Zimbabwe’s policy shifts make it hard to attract fresh investment, he says. “Investor confidence is low due to uncertainty on policies. Zimbabwe’s regulatory environment for mining and investment has been perceived as challenging, with concerns around policy uncertainty and bureaucratic hurdles,” Gong says. “Clear and consistent policies on licensing, taxation, and export regulations are essential to provide certainty and attract investment.”

While Zimbabwe looks to lithium to lift the economy, it has yet to build the infrastructure needed to take full advantage, says Gong: “The lack of infrastructure such as roads, power, and water supply in lithium-rich regions can hinder the exploration and extraction of lithium reserves.” – (NewZWire)

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