Zim's mining industry forecast maintain growth

Published: 08 September 2017

ZIMBABWE's mining industry is forecast to maintain its growth trajectory, driven by high production volumes, despite the revenue challenges posed by a downslide in global metal prices across most minerals.

Mining experts say opportunity for growth is huge given that the greater portion of Zimbabwe is yet to be explored.

The mining industry is pinning hopes on increased production volumes across the board through expansions, recapitalisation and retooling projects. Commodity prices, for instance platinum and gold, are recovering slowly.

The price of gold has fluctuated between $1 150 and $1 352 between January this year to date while platinum has recovered from $896 in July to $1 017 to date.

For nickel producer, Bindura ,cash constraints due to depressed nickel prices have led to smelter restart delays. The plant was expected to be completed in the current financial year, but has been delayed to financial year 2019. Management at BNC has, however, indicated the need to keep extracting higher grade ore.

Commenting on the company's outlook, brokerage firm IH Securities said the strategy for BNC, going forward, remains largely the same, as the company's profitability depended heavily on the global nickel price.

"Global nickel prices are expected to fall to around $10,500 per tonne this year from around $10,700 per tonne in the prior year and then recover to $11 288 per tonne in 2018.

"This means that we expect BNC to achieve a nickel price of $6 503 per tonne in FY18 and $7,337 per tonne in FY19 after Glencore charges," said the stockbrokers.

Bindura's after tax profit for the year to March 2017 remained flat at $609 000 although nickel production increased marginally to 6 762 tonnes. There was also a 3 percent decline in average nickel price achieved to $6 519 per tonne compared to $6 737 per tonne that was achieved in the prior year.

While overall costs of production in the sector remain high, the gold sector is expected to experience an upsurge in production this year and going forward. Gold producers have been encouraged to produce more this year as Government proposed to remove royalties for gold in 2018 if production is 22 percent above prior year.

"This is likely to see an improvement in production, however, with prices expected to be lower, it is in our view that miners might forfeit this incentive.

"The consolidation of diamond companies into one company is yet to yield positive results for the sector as output is expected to have fallen by 28 percent in2016," said IH Securities.

Mining conglomerate, RioZim Limited in June indicated it had begun operations at its newly acquired gold mine, Danly Mine in Chakari.

Danly Mine was shut down in 2013 by its former parent company, Falgold due to viability challenges emanating from the fall in global prices of gold resulting in the mine incurring losses and accruing unsustainable debts. This is expected to increase the group's overall production volumes and enhance its profitability.

With regard to coal production, prices are expected to average $70 a tonne in 2017, according to the World Bank quarterly report, 6 percent above 2016 due to continued efforts by China to reduce coal supply.

Hwange Colliery Company, Zimbabwe's second biggest coal miner, indicated it would resume underground mining of high value coking coal in October and is expected to return to profitability on the back of increased production volumes.
- bh24

Tags: Mining,