While Indaba always throws up interesting topics and ideas this year may be of particular interest in a few key areas. In July of 2017 Tanazania enacted a series of laws that caused uproar among the mining and investment communities - you can read more about this in our earlier alert on the changes. While on the flip side Zimbabwe has begun to open its arms to foreign investment following the change of government. We examine this further below, looking at some of the reasons to be excited about the change of direction within Zimbabwe and what it may mean for our clients looking to operate in the country.
Our team looks forward to catching up with old friends and making a great many more at Indaba. If you spot Josh, Nino or Michele in the crowd, please come and say hello.
Zimbabwe mining policy in the Post-Mugabe Era
Approximately 2 months after Robert Mugabe’s resignation and the swearing in of Emmerson Mnangagwa as new President, the mining sector is looking positive for Zimbabwe.
A 2017 State of the Mining Industry Survey Report, commissioned by the country’s chamber of mines and released in early December 2017 indicates that 90% of mining executives and investors are optimistic that the new Government will endeavour to resolve all legislative and policy bottlenecks affecting the mining industry and are optimistic of positive economic growth.
All of the 12 measured indicators in the report recorded improvements for 2018, compared to those recorded for 2017. Only 2 variables, political risk and access to capital, remained in negative territory. However, they also recorded improvements for the comparable periods.
Zimbabwe’s 51% indigenisation policy now only applies to diamond and platinum mines. All other types of mining and sectors are open to investors regardless of nationality - overturning a long standing Mugabe policy.
For platinum miners, the Government has reduced royalties from 10% to 2.5% and has deferred a 15% levy on raw platinum exports to 1 January 2019.
Mining is Zimbabwe’s largest earner of foreign currency, making up around 60% of total exports in 2016.
Despite the significant role of the mining sector to Zimbabwe’s economic development, Mines Minister Walter Chidhakwa has said it’s not realising its full potential.
The Mines and Minerals Amendment Bill (MMAB) was gazetted on 12 August 2016 and was referred to the parliamentary portfolio committee in May last year. It has recently been reported that Parliament is moving to pass the MMAB which seeks to repeal the principal Act crafted in 1961. However, Zimbabwean miners have been pushing Government for several years to amend the outdated Mines and Minerals Act 1963 and in our view, it’s unlikely it will be passed in the foreseeable future.
Amendments under the MMAB include:
- a “use it or lose it” policy which will prevent miners from holding land without conducting operations on and incurring expenditure in relation to the land;
- strengthening environmental provisions including making riverbed mining an offence;
- establishment of a cadastre system which provides a public rights of access to information on mining licences;
- the declaration of strategic minerals whose exploration and extraction will follow special rules; and
- the creation of a mining rehabilitation fund.
The MMAB signifies Zimbabwe trying to realise changes to regulation to encourage investment by increasing transparency and accountability. In the past, Zimbabwe has scared away investors with its challenging regulatory framework, high taxes, indigenisation policy and political turmoil. However, with the largest concentration of mineral deposits in the world, Zimbabwe hosts a range of opportunities for mining proponents.
Despite the outdated regulatory framework, the mining sector in Zimbabwe remains lucrative. Caledonia Mining has recently hit record production at its Blanket gold mine rising to USD $18.2 million in the third quarter from USD $17.2 million generated in the same period last year and is looking to expand its Blanket mine further.
Zimbabwe’s Mines Minister announced this year that it is planning to build a $200 million platinum refinery next year in a joint venture with Australia’s Kelltech Ltd.1 The Government’s investment in domestic processing and beneficiation provides opportunities for Australian companies to share technology and capabilities.
This year also saw the first battery grade lithium produced in South Africa by Prospect Resources from petalite rich ores mined from its Arcadia mine in Kwekwe, Zimbabwe. Prospect has produced battery grade lithium carbonate with purity of 99.5% and has reported that its pilot plant should be commission at the end of 2017. The plant is expected to produce 100kg of lithium carbonate.2
On January 2018 Prospect announced that it had completed a $10m capital raising to fund its projects.