Transcript Minerals, Natural Resources, African Panacea

Minerals & Natural Resources
The African Panacea*
and how Zimbabwe should position itself
A paper presented by Hon. Christopher Mutsvangwa
The Deputy Minister of Foreign Affairs
*Definition
Panacea: a solution or remedy for all difficulties
A brief profile of the presenter: C.H.MUTSVANGWA
Bachelor of Business Finance, Dip MIS, Master of Public Administration, (New York, USA) Ambassador Mutsvangwa is a
well accomplished public figure and strategist. His experience dates back to the pre-independence era where he left the
University of Rhodesia to join the liberation struggle. After independence, he worked with a large number of public
bodies which include; The Constitutional Commission of Zimbabwe (1999), Harare City Council (as a Commissioner in
2002), board member of Transmedia Corporate for Broadcasting Transmission (2001) and he has also sat on the
Morgan Zintec Advisory Council as its Chairman. Ambassador Mutsvangwa served as the Ambassador of Zimbabwe to
China for the period 2002-2007. During his tenure he oversaw the trebling of trade between Zimbabwe and China from
US$140 million to US$380 million by 2006. He also facilitated a number of public and private sector investment projects
during his tenure as Ambassador. He has made presentations to and attended a number of international and local
conferences spanning a wide array of strategic and economic issues. Currently he is the Managing Director of Moncris
(Pvt) Limited.
A photograph of the
Amb. C.Mutsvangwa
Greeting His
Excellency Hu Jintao
,the
President of the
People’s Republic of
China
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Below are some the private and public sector
projects which Hon. Mutsvangwa facilitated during
his tour of duty as Ambassador to China
Zimbabwean Company
Chinese Company
National Railways of Zimbabwe
(NRZ)
China National Railways
Nature of the Transaction
The establishment of line of credit to purchase
locomotives
Established a contract farming system that
assists indigenous farmers . turnover $1.3 B
The Procurement of 78 30-tonne trucks
The Supply of 160 pickup trucks
Tobacco Industry
China Tobacco
Road Motor Services (RMS)
CAMCO
Zimbabwe National Army (ZNA) Beijing Autoworks (BAW)
China Northern Industries
Forestry Company of Zimbabwe (NORINCO)
The supply of 10 Deutz engines
The Procurement of 500 000 t-shirts for the
ZANU (PF)
Shenzhen Printing Co.
2005 parliamentary elections
The supply of fertilizer and agro chemicals
Government of Zimbabwe
CMCC
worth $200 million
Establish Air Zimbabwe' s direct flight from
Air Zimbabwe
Government of China
Harare to Beijing & Harare to Guangzhou
Air Zimbabwe
CATIC
The supply of three aircrafts the MA60
Farmer's World
CAMCO
The supply of tractors and dump trucks
China Northern Industries
ZMDC
(NORINCO)
The supply and delivery of 10 dump trucks
Limpopo Motors
Hongdu Motorbikes
The supply and delivery of 100 motorbikes
The procurement of transmission equipment
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Transmedia
Star Corporation
worth $64 million
Some of the world’s largest fund managers share
Ambassador’s views on the potential of natural
resources and minerals to elevate African economies
MARK MOBIUS, Executive Chairman Franklin Templeton
•frontier markets such as Zimbabwe offer the same investment
attractiveness which was available in BRIC countries during their major
stages of development
GOLDMAN SACHS
•it is estimated by Goldman Sachs that Africa will have the largest
workforce in the world by the middle of the century. “Demographics are
becoming very favorable and will be the envy of the world in 20 years
time
WORLD BANK
•The World Bank wants to launch a $1 billion fund in July to map the
mineral resources of Africa, using satellites and airborne surveys to fill
geological gaps across the continent where a lack of adequate data
hampers mining investments
Sub-Saharan Africa attracted $1.6 billion of private equity
investment in 2013, the most in five years,
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The positive outlook on Africa is based upon
Asia’s demand for Africa’s natural resources
Mineral Supply Chain
Mineral Supply Chain
(Circa 1900-2000)
(Circa 2000- )
Africa
Africa
Western
World
Asia
Note this
chain lead to
creation of
trade hub
know as
London Metal
Exchange
Western
World
Asia
Western capital now faces stern challenge from
EXIM Banks RICS and emerging market SWF to
secure minerals - all to the benefit of Africa
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China’s demand for commodities from the
emerging markets is expected to remain strong
for the next 20 years
Latin America and Africa will continue to profit from the projected surge in Chinese commodity importsC
Source: Deutsche Bank Research
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A snapshot of some of Zimbabwe’s mineral
use and their commercial use
Mineral
Commercial Use
Comment
Platinum
Catalytic Converters
Currently there are estimates of 1 billion cars
on the roads, CNBC predicts that number to
expand to 1.7 Billion by 2035
Aluminium
Containers carbonated drinks
I am sure the world population will still be
drinking Coca Cola fifty years from now
Chromium
Catalyst stainless steel production
Zimbabwe’s chrome reserves in the great
dyke can almost be described as infinite
Coal
Core input in power plants
Current rough estimation a reserve of 11
billion tonnes
Cobalt
Treatment of cancer
A special isotope called radioactive Cobalt-60
Corundum
Sand paper, abrasives, grinding
wheels
Second hardest mineral in the world behind
diamond
Lithium
Mobile phone Batteries
Everybody has a cell phone
Tungsten
Filament in light bulbs
Tungsten has highest melting point of all
metals
Tantalum
Used in making surgical
appliances
Can be used for bone/hip replacements. No
immune response to mammals
This list is endless
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Which Investors have the largest appetite for our
resources- THE SWFs over $6 trillion
Interesting to
note:
The World Bank
which has been
the traditional
source of
funding has
total assets of
$338 billion.
Maybe
Zimbabwe
should shift its
focus
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Zimbabwe needs to strategically position itself so that it
can secure less than a quarter of the total assets under
management of the SWF so it can clear its public debt
 For Zimbabwe to attract FDI we have to approximate the quantity and value of
our minerals that are still in the Earth’s crust and are yet to be extracted
 The Challenge so far in doing the above is lack of capital and it is not expected
that our domestic Fiscus will be able to meet this cost in the near future.
 That having been said we can adopt method used by the diamond mining houses
where the Government of Zimbabwe places on tender substantially large
concessions to be offered to large Financial Institutions such as Multinational
Banks, Sovereign Wealth Funds and large private equity funds. I am convinced
these auction/tenders will be oversubscribed by bidders who are desperately
seeking finite minerals.
 Due to the fact that bidders will be competing against some of the largest funding
houses in the world it would be imperative that they submit aggressive tender
offers in order to secure any chance of winning the concession. The Government
of Zimbabwe will be able to build a database of these participants and in turn
market other minerals to them in the future
 It is critical that Zimbabwe insists that all capital raising activities of natural
resource be originated in Zimbabwe. Thus we must implement legislature that
prevents companies to list on their Foreign exchanges when trying to raise
funding for mining activities on the back of Zimbabwe minerals. We must ensure
that these investing companies list on the Zimbabwe Stock Exchange or
conversely a whole new Metal Exchange
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A rapidly growing middle class in Africa and Asia will lead to a
protracted & sustained demand on minerals. A paradigm shfit
from rural to urban society vis-à-vis Infrastructure growth
It is forecasted that the entire African Population will have access to Broadband by 2060
Source: African Development Bank
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Introduction: Metal Exchange
 A metal exchange is an entity that provides services for mineral brokers and
traders to trade minerals through future contracts. The metal exchange can
facilitate physical delivery of the minerals
 The daily prices published by the metal exchange may be used as a pricing
reference for industry
 The metal exchange offers those at all stages of the metals supply chain,
including both buyers and sellers, the opportunity to hedge their material price
risk, and therefore gain protection from future adverse price movements
 The metal exchange can build a cache of minerals which it can store in its own
warehouses to provide transparency for buyers who wish to secure product
 The metal exchange will also ensure that minerals on the exchange meet a
certain quality standards to ensure that buyers are not shortchanged
 The metal exchange provides the environment for trading and regulates the
operation of the market. It has a statutory requirement to ensure that business
on its markets is conducted in an orderly manner, providing proper protection to
investors
It makes no sense for a country like Zimbabwe to only 5 mining counters on the Zimbabwe Stock
Exchange while having over 70 Financial and Industrial counters. Zimbabwe needs to focus on its
economic competitive advantage and that lies in minerals
Source: London Metal Stock Exchange
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The role and benefits of a Metal Exchange
Raising capital for
mining businesses
Mobilize savings for
investments
• The metal exchange will provide a market where
small and big mining companies will be a able to
have closer access to mineral buyers and traders
• Zimbabweans will have an alternative investment
opportunity where they can allocate their finances
and benefit from Futures Trading
Facilitate growth of the
mining sector
• The mining companies will be able to leverage their
future contracts to expand product lines, increase
distribution channels and acquiring business assets
Expansion of the
national financial
sector
• The fees and commissions accrued from these
transactions will circulate through our local financial
institutions
It is important to note there are no significant ore reserves in the UK yet there citizens benefit
immensely from minerals from Africa and Latin America. It is time that local inhabitants, the
sovereign owners of these minerals BENEFIT
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Why Harare should establish a metal
exchange
 Harare is centrally located and has several transportation channels including road,
rail and air that can provide for the easy delivery of minerals to the metal
exchange warehouse
 Harare has an International Airport where buyers who wish to view product can
easily fly from their host countries
 The London Metal Exchange (LME) generated revenues of $46 Billion per business
day in 2010. (Indeed the LME handles metal trades for the world but even if
Zimbabwe was to generate just 1% that would be $0.46 Billion)
 The metal exchange will expose local small-scale miners to traders and buyers
who have the capacity to raise working capital for mining operation
 The metal exchange will promote the creation of value addition processes in the
mining activities, including the construction of smelters and washing plants
 The metal exchange will create jobs for miners, geologists, stockbrokers,
laboratory technicians, transporters, bankers, equipment manufacturers, hoteliers
 Harare has a developed telecommunications infrastructure including fixed and
cellular networks and a rapidly growing broadband network
 Zimbabwe has an advanced financial industry that is operating in US dollar
economy and thus there will be no exchange rate risk and making transactions
much more ‘clear-cut’
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One of the key ways Zimbabwe can benefit from
its minerals is by adding value to them also
know as beneficiation
Below is a simple calculation that estimates the value a chrome
smelter can add to the nation (figures based on new Afrochine Smelter)
 It is difficult to give an exact figure but I WILL TRY. chrome ore currently sells at $120
per tonne (ex-Zim) . This smelter will produce approximately 350 tonnes of ferrochrome
per day.
 The current price of ferrochrome (ex-Zim) is conservatively $600 per tonne this will give
a total of $600 x 350 = $210 000 a day this will give an annual return of 210 000 x
365 = $76.65 Million dollars a year (Please note this is revenue not profit
furthermore it is dependent upon the smelter operating at 100% capacity everyday
throughout the year)
 This is as opposed to $120*350*365= 15.33 million which would have been secured
as raw chrome export)- INDEED A PRINCELY SUM- but much less than ferrochrome
 In addition to the revenue generated from ferrochrome sales, the smelter will create
jobs for the people directly operating the smelter. Further to that the creation of
accommodation and other amenities will be initiated for the provision of the families
 The energy sector will also benefit as that will be one of the major inputs purchased to
operate the smelter
 The transport sector will also benefit as chrome mines will transport their produce to
the smelter and ferrochrome will have to be transported to the ports for export
Initial cost outlay to construct smelter is circa $25 million
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The minerals depicted below (gold, platinum, diamond,
iron ore,chrome ore,coal) will be Zimbabwe’s panacea if
administered properly
The following slides
will provide a
special focus on
platinum and its
potential
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Thank you for your undivided attention
How is my time looking do I still have time to present a brief on platinum
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Introduction: Platinum
 Platinum is generally non-reactive. It exhibits a remarkable resistance to corrosion,
even at high temperatures, and as such is considered a noble metal
 Platinum is used in catalytic converters, laboratory equipment, electrical contacts
and electrodes, platinum resistance thermometers, dentistry equipment, and jewelry.
Because only a few hundred tonnes are produced annually, it is a scarce material, and
is highly valuable and is a major precious metal commodity.
 Platinum's resistance to wear and tarnish is well suited for making fine jewelry. Pure
platinum is slightly harder than pure iron. The metal has an excellent resistance
to corrosion and high temperature and has stable electrical properties. All of these
characteristics have been used for industrial applications
 Of the 245 tonnes of platinum sold in 2010, 113 tonnes were used for vehicle
emissions control devices (46%), 76 tonnes for jewelry (31%). The remaining
35.5 tonnes went to various other minor applications, such as investment, electrodes,
anticancer drugs, oxygen sensors, spark plugs and turbine engine
 The most common use of platinum is as a catalyst in chemical reactions, many times
as platinum black. It has been employed in this application since the early 19th
century, when platinum powder was used to catalyze the ignition of hydrogen. Its most
important application is in automobiles as catalytic converter, which allows the
complete combustion of low concentrations of unburned hydrocarbons from the
exhaust into carbon dioxide and water vapor. Platinum is also used in the petroleum
industry as a catalyst in a number of separate processes
Source: Wikipedia
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Zimbabwe’s platinum reserves are located
along the great dyke
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Zimbabwe & Platinum
 Zimbabwe has the second largest known deposits of platinum in the world
 The majority of Zimbabwe’s platinum reserves are located in the great dyke
 Zimbabwe's oldest platinum mine is the Mimosa operation, located in the
southern part of the Great Dyke on the Wedza Geological Complex. Ownership is
currently split 50:50 between Impala Platinum and Aquarius Platinum
 Since 2002, output at Mimosa has gradually been expanded, and the mine which has been among the lowest-cost platinum producers in the world - extracts
around 100,000 oz of platinum annually.
 In 2011, The largest mine Zimplats (we will look in at depth in the following
slides) produced about 185,000 oz of platinum at Ngezi from a series of
underground "portals" (declines), and an expansion programme is underway
which will see output rise to 270,000 oz of platinum annually
 A third platinum mine, Anglo American's Unki project, was commissioned in late
2010 and produced around 50,000 oz of platinum in 2011. The mine is designed
to extract and process 120,000 tonnes of ore per month, which should yield
around 70,000 oz of platinum annually at full capacity
Source: Zimplats Website
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Current world Platinum supply is failing to meet
world platinum demand. Zimbabwe is the third
largest producer behind South Africa & Russia
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The value of platinum per ounce has
generally increased over the past decade
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The largest players on world platinum market are generally
members of the International Platinum Group Metals
Association (1 of 2)
The members of the IPA together employ nearly
 Anglo American Platinum Limited
a quarter of a million people and have a
turnover of over 40 billion US dollars per year
– The Anglo American Platinum group is the world's leading primary producer of platinum and
accounts for about 40 per cent of the world’s newly mined production
– Anglo American Platinum's operations, including seven mines, three smelters, a base metals
refinery and a precious metals refinery, are situated in the Mpumalanga, Limpopo and North
West Provinces of South Africa. Anglo American Platinum is based in South Africa.
 BASF
– BASF Catalysts (formerly called Engelhard Corporation) is the world’s largest catalyst company.
The company’s material services segment provides precious and base metal services to its
customers, including sourcing, financing, logistics support, price quotes, recycling chemical
solutions and risk management
 ISHIFUKU
– Founded in 1930 in Japan, Ishifuku refines, recovers and sells precious materials. The company
deals with everything from raw materials containing precious metals to finished products
 UMICORE (FABRICATION)
– Umicore is a materials technology group. Its activities are centred on four business areas:
Advanced Materials, Precious Metals Products and Catalysts, Precious Metals Services and Zinc
Specialties
– The Umicore Group has industrial operations on all continents and serves a global customer
base; it generated a turnover of EUR 6.93 billion in 2009 and currently employs some 13,720
people (as of December 2009). The company is based in Belgium
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The largest players on world platinum market are generally
members of the International Platinum Group Metals
Association (2 of 2)
 Tanaka Kikinzoku International
– Tanaka Kikinzoku International K.K., part of the Tanaka Holdings Co. Ltd., manufactures,
researches and develops precious metal industrial products and precious metals bullion.
– Tanaka Kikinzoku International K.K. exports and sells precious metal industrial products. The
group is based in Japan.
 Krastvetmet
– Krastsvetmet is one of the leading refiners of PGMs as well as gold and silver. The company ranks
first among the Russian refineries in terms of technology level and scientific development
– The company processes about 99% of platinum and palladium mined in Russia, practically 100%
of PGMs, about 50% of gold and up to 60% of silver. Krastsvetmet is involved in the production of
precious metals, precious metals chemical compounds, metalworking, jewellery as well as in
analytical facilities
– he company is headquartered in Krasnoyarsk, in Siberia, Russia, and employs over 2,700 people
 Johnson Matthey
– Johnson Matthey is a speciality chemicals company with operations in over 30 countries and
employs around 8,500 people worldwide
– Its principal activities include the manufacture of autocatalysts, heavy duty diesel catalysts and
pollution control systems, catalysts and components for fuel cells, catalysts and technologies for
chemical processes, fine chemicals, chemical catalysts and active pharmaceutical ingredients and
the marketing, refining and fabrication of precious metals.
– Johnson Matthey is a FTSE 100 ranked company with a total revenue of £7.8 billion and profit
before tax, amortisation of acquired intangibles and restructuring charges of £267.9 million in the
financial year to 31st March 2009
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Johnson Matthey and BASF are some of the
largest producers of catalytic converters in the
world today
 Definition : Catalytic Converters
– A catalytic converter is a device used to reduce the harmful emissions from an internal
combustion engine (used in most modern day automobiles and vehicles). There is not
enough oxygen available to oxidize the carbon fuel used in these engines completely into
carbon dioxide and water, thus toxic by-products are produced. Catalytic converters are
used in exhaust systems to provide a place for the oxidation and reduction of toxic byproducts (like nitrogen oxides, carbon monoxides, and hydrocarbons) of fuel into less
hazardous substances for the environment such as carbon dioxide, water vapor, and
nitrogen gas.
 BASF is now the world's largest manufacturer of catalytic converters.
– BASF's Catalysts division, headquartered in Iselin, New Jersey, is the world’s leading
supplier of environmental and process catalysts. The group employs more than 5,000, with
over 30 manufacturing sites worldwide.
– The company is currently expanding its international activities with a particular focus on
Asia. Between 1990 and 2005, the company invested €5.6 billion in Asia, for example in
sites near Nanjing and Shanghai, Chinaand Mangalore in India.
 Johnson Matthey through its state-of-the-art manufacturing process, Precision
Coating, applies measured doses of platinum group metals to the tightest tolerances
achieved in the industry.
– Johnson Matthey is known as a pioneer in the field of emissions control, having made the
world’s first autocatalysts in its Royston facility, and invented the innovative CRT® diesel
particulate filter technology.
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Port Elizabeth produces South Africa’s most
catalytic converters. Norton could follow suit
 Home of South Africa's motor vehicle industry, Port Elizabeth boasts most vehicle
assembly plants, General Motors, Volkswagen, Ford, Continental Tyres and many
more automotive companies. Most other industries in the NMMM are geared
towards the motor vehicle industry, providing parts such as wiring
harnesses, catalytic converters, batteries and tyres to the vehicle manufacturers
 BASF has a catalytic manufacturing plant in Port Elizabeth
 Engelhard South Africa completed the construction of its Catalytic Converter
Factory in 2012 at a cost of R120 million (approx USD$12 million)
 The Port Elizabeth BASF business began producing automotive catalysts in
September 1994 with seven employees who worked in leased space at the local
Ford Engine Plant. Validation of BASF’s Port Elizabeth plant was completed in
January 1995, with two approved customers. Increased demand led to capacity
expansions until December 2001, when the business moved to a new, larger site
in Struanway, where a world-class facility was established.
 Today, BASF’s Port Elizabeth facility is equipped with state-of-the-art, high-speed,
meter-charged coaters. This technologically advanced equipment is used to
manufacture Diesel Oxidation Catalysts, Diesel Particulate Filters and Three-WayCatalysts. Since inception, BASF’s Three-Way-Catalyst technology has, on a
global basis, destroyed over one billion tons of HC, CO and NOx before these toxic
exhaust gases reached the atmosphere.
Source: BASF Website
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Platinum Jewelry is booming in China
 Platinum has become a favorite metal for its polish, high quality and strength.
What people may not know is that platinum, unlike other precious metals, doesn’t
cast color onto the stones or diamonds it’s set with. It’s a great option for men's
and women's wedding bands
 Demand for platinum in China has surged since 1995, especially among young
urban women seeking the modern style that platinum jewellery represents, so
that China is now easily the largest single market for platinum jewellery. In the
last decade, demand has begun to grow in India.
 China’s jewelry demand rose 16% in 2012, The world's biggest market for
platinum jewellery consumed 1.95 million ounces last year, within sight of the
2009 all-time high of 2.08 million. Consumption was 1.680 million ounces in
2011.
 In 2011, platinum got more attention than gold from most jewellery buyers' in
China, with prices predicted to go higher this year given the surging demand from
citizens and from the autocatalyst sector
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