ALEX MHEMBERE
PRESIDENT
CHAMBER OF MINES OF ZIMBABWE
PRESENTATION OUTLINE
REVIEW
1.


A Brief Overview of the Mining Industry in Zimbabwe
Performance trends and outlook
STRATEGIES FOR THE MINING INDUSTRY
2.
 Mining
 Beneficiation
3. NEW LEGISLATION & REGULATIONS
Mines and Minerals Act
 Mining Taxation
 Mining Incentives

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
prominent geological
features namely the Great
Dyke and the ancient
Greenstone Belts.
 Major known minerals
include Gold, Coal, PGMs,
Diamonds
3
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.
4
Mining sector growth outpacing the GDP growth
Average sectorial growth 2009-2013
20%
10.40%
8.40%
7.30%
agric
Manufacturing
Mining
GDP
5
Mineral Output trend
• There has been a significant increase in mineral production since
2009.
• Growth is expected to moderate due to the lack of capital investment
in mineral development and exploration.
Mineral
2011 Actual
2012 Actual
2013 Actual
2014 Proj
Gold (kgs)
13,000
14,800
14,000
13,800
Coal (tons)
2,922,000
1,785,000
4,980,000
4,000,000
Nickel (metric tons)
8,000
7,900
14,000
14,232
Platinum (kgs)
10,827
10,524
13,000
11,700
Chrome Ore (tons)
599,000
408,575
450,000
650,000
8,100
10,200
8,800
Palladium (kgs)
8,400
Diamonds (tons)
8,719,000
12,014,802
10,528,000
8,000,000
Overall Growth
24.4%
8.0%
6.5%
-1.9%
Value of Mineral Production (US$m), 1980-2013
mining exports (USD million)
2200
2169
1691
1443
645
1980
689
733
712
850
866
2007
2008
702
600
1990
1996
2000
2005
2006
Source: ZIMSTAT and COMZ
2009
2010
2011
2012
7
Challenges facing the sector
 The sector continues to face systematic challenges that
include:
 Depressed mineral prices
 inadequate funding
 frequent power outages,
 Escalating operating costs, such power, labour and
consumables
 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
gold output
Potential Growth for Gold
30,000.00
gold output (kg)
Output reached a peak 27 tons in 1999.
25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
2014f
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1995
1993
1991
1989
1987
1986
1985
1984
1983
1982
1981
1980
-
• 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
14,000.00
12,000.00
Platinum Production (kgs)
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00
2001
2002
2003
2004
2005
2006
2007
2008 2009
2010
2011
2012
2013
• 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.
11
Depressed prices have reduced the platinum earnings
6,000.00
5,000.00
Coal production (Kt)
4,000.00
3,000.00
2,000.00
1,000.00
-
• 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
Africa.
 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
1.6
1.4
1.2
•
1
0.8
•
Production peaked in 1992 at 1.46 Mt, and then fell
to zero in 2008
Huge production potential
0.6
0.4
0.2
0
Ripple Creek
•
•
•
Buchwa
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
Nickel production (tonnes)
16,000.00
14,000.00
12,000.00
10,000.00
8,000.00
Nickel production (tonnes)
6,000.00
4,000.00
2,000.00
-
 For nearly4 years, most nickel were produced by platinum mining operations as a
byproduct.
 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
maintenance
Ferrochrome
350000
300000
250000
200000
Ferrochromium Production (tonnes)
150000
100000
50000
0
1980 1984 1988 1992 1996 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011
2012 2013
• 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
increase production
to around
540,000 tons by 2018.
October
2013
Diamond output
 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
diamonds.
 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
European Union.
STRATEGIES FOR MINING SECTOR
Strategic Pillars
There are 4 pillars as follows:
 Investment competitiveness
 Resuscitation & Growth
 New mining Development
 Value addition & beneficiation
Investment Attractiveness
 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
 Perception
 Project Attractivenes hinges on:
 Expected returns
 Skills availability
 Fiscal matters and statutoty fees.
Resuscitation & Growth
 Most mines are currently operating slightly above 50%
of their capacities due to lack of finances for
recapitalisation.
 The 2009 mining economic rebound driven by old
reserves which are fast depleting.
 Urgent need for recapitalisation
 Opportunities exists organic growth, brownfields
projects
Green Projects
 Abundant mineral resources not yet adequately
quantified
 Leading in platinum, Gold, Chrome, Iron Ore, Coal,
tin and Coal bed methane.
 Huge opportunities for exploration and mining
development.
 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
REGULATORY FRAMEWORK
 The Mines and Minerals Act Chapter 21:05 is the
principal legislative tool guiding mining operations
in Zimbabwe.
 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.
Sept 2013
27
OTHER LAWS GOVERNING INVESTMENT
 Other pieces of legislation that govern foreign investment
include:
 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
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minerals produced and sold as follows:
Precious Stones
15%
Gold
7%
Platinum
10%
Base Metals
2%
Industrial Minerals
2%
Coal Bed Methane Gas
2%
Coal
1%
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
deductible.
MINING
INCENTIVES
 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.
I.
II.
III.
IV.
V.
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
exploration title.
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
operations
MINING INCENTIVES CNT’D
Marketing of minerals
 Mining companies are granted the right to market their minerals
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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
capital equipment.
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
approval.
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
Conclusion
 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
levels
 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 &
Industrial Policies.
 Competitive fiscal regime
 We need to attract investment to the sector
 Improve critical infrastructure, i.e. electricity, roads and water supply
END