Session 1 Alex Mhembere President 2014 Mining Indaba Presentation
Transcript Session 1 Alex Mhembere President 2014 Mining Indaba Presentation
CHAMBER OF MINES OF ZIMBABWE
A Brief Overview of the Mining Industry in Zimbabwe
Performance trends and outlook
STRATEGIES FOR THE MINING INDUSTRY
3. NEW LEGISLATION & REGULATIONS
Mines and Minerals Act
How Much Geological Potential is There?
Varied Geology: Approximately 60% of
Zimbabwe’s land surface
comprises of ancient rocks
renowned worldwide for
containing rich varieties of
mineral resources .
The country’s diversified
mineral resource base is
dominated by two
features namely the Great
Dyke and the ancient
Major known minerals
include Gold, Coal, PGMs,
Mining sector: Anchor for economic
development (Zim Asset)
Sterling performance by the mining industry in the past 5 years has seen
the sector becoming one of the main pillars of the economy recovery,
leading the 2009-2013 rebound with average growth around 20%.
Through the Zimbabwe Agenda for Sustainable Socio-Economic
Transformation( Zim ASSET) the government earmarks the sector to
grow by an average annual rate of 10% between 2014 and 2018 compared
to all other sectors which are anticipated to grow in single digits.
At this rate the sector has the capacity and potential to create substantial
impetus for economic growth and value addition.
Mining sector growth outpacing the GDP growth
Average sectorial growth 2009-2013
Mineral Output trend
• There has been a significant increase in mineral production since
• Growth is expected to moderate due to the lack of capital investment
in mineral development and exploration.
Nickel (metric tons)
Chrome Ore (tons)
Value of Mineral Production (US$m), 1980-2013
mining exports (USD million)
Source: ZIMSTAT and COMZ
Challenges facing the sector
The sector continues to face systematic challenges that
Depressed mineral prices
frequent power outages,
Escalating operating costs, such power, labour and
High regulatory taxes, fees, levies and royalties
This has negatively impacted on the output for gold,
platinum and diamond, necessitating a downward
revision of sector growth for 2014 from 10.8% to -1.9%.
Depressed gold prices hampering down recovery of
Potential Growth for Gold
gold output (kg)
Output reached a peak 27 tons in 1999.
• The gold mining sector is currently operating at 50% of
potential capacity utilisation.
• A recent World Bank Study estimated that by 2018
production could reach 28.5 tons if the sector secures capital
of between $420 million.
Platinum has experienced phenomenal growth
in the past decade
Platinum Production (kgs)
• Zimbabwe hosts the second largest known PGM resource in the world on
the Great Dyke.
• Potential new projects include ENRC, Ruschrome (Rostec), Global Platinum Resources
and Zimari Platinum.
• These projects are listed as Joint Venture projects under ZMDC.
Depressed prices have reduced the platinum earnings
Coal production (Kt)
• Production is currently around 5 million t/yr .
• World Bank forecasts production to reach 9.8Mt by 2018 if the sub
sector secures capital to the tune of USD3 billion.
• Over 29 coal localities are known with estimated resources of
approximately 12 billion tonnes.
Coal-bed Methane (CBM)
The Coal-bed Methane (CBM) resources in the
Hwange/Lupane basins are estimated at over 27-40 TCF
(trillion cubic feet) of sulphur-free methane gas, which
rank Zimbabwe’s resources at 11th globally, after South
There are plans for a thermal power station based on the
Lupane CBM resources and the reserves are currently
being appraised for this.
CBM could also provide the feedstock for nitrogenous
fertilisers and other methanol chemicals.
Iron and Steel
Production peaked in 1992 at 1.46 Mt, and then fell
to zero in 2008
Huge production potential
Zimbabwe has huge iron ore deposits associated with banded ironstone
formations in greenstone belts.
Major deposits are estimated to host at least 30 billion tonnes of reserves.
Currently no significant iron ore mining or steel production in Zimbabwe
Nickel production (tonnes)
Nickel production (tonnes)
For nearly4 years, most nickel were produced by platinum mining operations as a
Production is expected to increase significantly on the back of the primary producer
BNC which resuscitated its mining operations after a long spell on care and
Ferrochromium Production (tonnes)
1980 1984 1988 1992 1996 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011
• Zimbabwe is estimated to host over 80% of the world’s resources of
metallurgical quality chromite.
• Chromite reserves on the Great Dyke approximate 10 billion tonnes.
• The sub sector requires a minimum capital of USD85 million to
540,000 tons by 2018.
The recent discovery of significant placer diamond deposits
at Chiadzwa points to significant potential in ancient basins
on the edges of the craton.
If the deposits are mined extensively, Zimbabwe has the
potential to produce approximately 25% of the world’s
In 2014, diamond output is projected at 8million carats,
benefiting from the recent removal of the Zimbabwe Mining
Diamond Corporation (ZMDC) from the sanctions list by
STRATEGIES FOR MINING SECTOR
There are 4 pillars as follows:
Resuscitation & Growth
New mining Development
Value addition & beneficiation
Mining an international business
Investment attractiveness at both country and project
level critical to attract investment
Country attractiveness hinges on:
Clear and consistent regulations and policies
Ease of doing business
Project Attractivenes hinges on:
Fiscal matters and statutoty fees.
Resuscitation & Growth
Most mines are currently operating slightly above 50%
of their capacities due to lack of finances for
The 2009 mining economic rebound driven by old
reserves which are fast depleting.
Urgent need for recapitalisation
Opportunities exists organic growth, brownfields
Abundant mineral resources not yet adequately
Leading in platinum, Gold, Chrome, Iron Ore, Coal,
tin and Coal bed methane.
Huge opportunities for exploration and mining
Market investment opportunities
Value Addition & Beneficiation
Resuscitate mothballed operations:
Base Metal Refineries, SMC, BNR & ENR
Steel Plant – Zisco
Chrome Smelting several
Expand exiting facilities
Establish new facilities, platinum, diamonds
Create linkages with other sectors manufacturing,
agriculture, construction etc etc
NEW LEGISLATION & REGULATIONS
The Mines and Minerals Act Chapter 21:05 is the
principal legislative tool guiding mining operations
The Government is in the process of finalizing
revision of the Act which is intended to:
Provide for an improved and competitive mining legislative framework,
which offers a user-friendly operating mining environment,
Guarantee increased capacity in mineral production, continuous
exploration, beneficiation and value addition,
Make it more investment-focused, based on a win-win principle that
also addresses issues of levies and taxes to reflect prudence in the
application of mineral rents
Mineral Development Framework
Government is also finalizing the development of a
comprehensive Mineral Development Policy to guide
investors towards sustainable exploitation of mineral
resources of Zimbabwe in a win – win manner.
The Mineral Policy aspires to integrate the mineral sector
with the rest of the economy;
establish a fiscal regime which ensures benefits to the country and remain
internationally competitive (A review of tax regime is underway ).
support mineral beneficiation and marketing;
Develop and integrate small scale miners and,
promote indigenous and public participation in mining activities.
OTHER LAWS GOVERNING INVESTMENT
Other pieces of legislation that govern foreign investment
The Zimbabwe Investment Authority Act
The Indigenization and Empowerment Act
The Minerals Marketing Corporation Act
The Zimbabwe Mining Development Corporation Act
Precious Stones Trade Act
It is the government's priority to establish an investor-friendly
environment in this sector through the adoption of
international best practices and ensure that it transforms it into
a world-class mining investment destination.
REQUIREMENTS AND PROCEDURES FOR
INVESTING IN THE MINING SECTOR
Investment entry points
Access to prospecting and mining ground may be easily
obtained, either by:
pegging or registration of claims
purchase or lease of existing properties
entering into joint ventures with going concerns.
MINING TAXATION AND INCENTIVES
Royalty is calculated as a percentage of the gross fair market value of
minerals produced and sold as follows:
Coal Bed Methane Gas
Income tax on mining operations is levied at 15% for Special Mining Lease
holders and 25% for other mining title holders and all capital expenditure
incurred exclusively for mining operations is deductible at a rate of 100%.
Mining companies enjoy indefinite carry forward of their tax losses.
Investors are allowed to borrow locally for working capital purposes.
Offshore borrowings require Reserve Bank approval and interest paid on
borrowings of a debt to equity ratio of up to a maximum of 3 to 1 are tax
Exploration and Mining
Rebate and Suspension of duty may be granted in terms of the
Customs and Excise (General) Regulations, 2001 and Customs and
Excise (Suspension) (Amendment) Regulations, 2010.
Rebate of duty may be granted on goods for the prospecting and
search for mineral deposits. Goods are imported by a person who
has entered into a contract with the Government, i.e. with
Rebate of duty may be granted on goods imported in terms of an
agreement entered in pursuant to a Special Mining Lease.
Rebate of duty may be granted on goods imported temporarily for
an approved project.
Rebate of duty may be granted on goods for incorporation in the
construction of approved projects.
Suspension of duty may be granted to a holder in respect of
specified goods which, during the specified period, are imported by
the holder for use solely and exclusively for mining development
MINING INCENTIVES CNT’D
Marketing of minerals
Mining companies are granted the right to market their minerals
directly, in accordance with the provisions of the Minerals Marketing
Corporation of Zimbabwe (MMCZ) Act.
There is no restriction on the amount of foreign currency brought into
Zimbabwe. The foreign investment equity can be in the form of cash or
Operation of foreign currency accounts is permitted upon approval by
the Reserve Bank of Zimbabwe.
Investors can remit 100% of their dividends subject to Exchange Control
On disinvestment, 100% repatriation of invested capital is allowed.
Investments of more than US$100 Million qualify for Special Mining
Lease, which allows investors to negotiate for favourable concessions.
There is no restriction on dividend remittances and on disinvestment
Zimbabwe is endowed with abundant mineral resources, and indeed
mining can become the cornerstone of an economic turnaround
We need to resuscitate existing mines on care and maintenance to pre-1998
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 &
Competitive fiscal regime
We need to attract investment to the sector
Improve critical infrastructure, i.e. electricity, roads and water supply