Mines and Mining Development deputy minister, Fred Moyo
EXPORT earnings for Zimbabwe’s mining sector plummeted by 17 percent in the first quarter of this year due to falling prices on international markets, the Financial Gazette’s Companies & Markets (C&M) can report.
The development comes at a time when government, in its economic blue print, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset), has identified the mining sector as the pillar of economic revival.
Mines and Mining Development deputy minister, Fred Moyo, told C&M on the sidelines of an investment conference in Johannesburg, South Africa, last week that the sector generated about US$466 million compared to US$559 million in the same period last year.
This was despite the fact that production of most minerals marginally increased during the first quarter of the year due to reduction in gold royalties, an ongoing gold mobilisation exercise, resuscitation of closed mines, increased capacity utilisation and improved investor confidence in the mining sector.
Platinum group metals (PGMs), ferrochrome, gold, coal, diamonds and nickel prices were the most affected.
“Falling commodity prices are beginning to be felt locally, with the prices of PGMs, ferrochrome, gold, coal, diamonds and nickel all registering lower prices in 2015 than they did at the same time in 2014,” said Moyo.
“Export earnings, softened by 17 percent from US$559 million realised in the first quarter of 2014 to about US$466 million in the 2015 comparable period,” he said.
Platinum prices have fallen by nearly 10 percent since 2014 to less than US$1 100 an ounce and are likely to fall further, making platinum mines such as Zimplats, the biggest platinum miner in the country, Mimosa and Unki, unprofitable.
Analysts said prices were likely to be pushed to less than US$1 000 per ounce. This means platinum producing companies would lose money.
“If platinum slides below US$1 000 an ounce, which is likely, nearly two-thirds of the industry could be under water,” Hanre Rossouw, a fund manager with Investec of South Africa, said.
Apart from weakening platinum prices on the international markets, low export earnings could be attributed to the decline in production which resulted from the collapse of Zimplats’ Bimha mine in August last year, leading to its closure.
Zimbabwe has the world’s second largest platinum resources with an estimated 2,8 billion tonnes of PGM ore.
The outlook could be bleaker for the mining industry which is strategic to the Zimbabwean economy.
Government had hoped the sector would prop up the ailing economy but the mining industry is now plagued by weakening commodity prices.
The sector has, however, remained the anchor of the economy since 2009. It is the highest foreign currency earner, accounting for about 45 percent of the country’s export earnings and more than US$3 billion worth of contribution to gross domestic product.
But the weakening prices are a cause for concern for the country as it affects the viability of the companies as well as growth of the overall economy.
It is understood there are 4 000 recorded gold deposits in the country but currently, about 40 percent of these are being commercially worked on.
Over the last few weeks, gold prices have steadily fallen from above US$1 200 per ounce to below US$1 160 per ounce.
Diamond export earnings have also declined. The diamond industry grew significantly between 2009 and 2012 but export sales have been falling due to a decline in production.
Zimbabwe is known to host several kimberlites whose economic and commercial viability is yet to be ascertained.
The country also hosts about 10 billion tonnes of chromite reserves on the Greak Dyke which is estimated to be 80 percent of the world’s resource of metallurgical quality chromite.
Apart from weak international commodity prices, the mining sector has also been hit by frequent power outages, obsolete equipment and inadequate funding for re-capitalisation.
newsdesk@fingaz.co.zw