2023: A gruelling year for miners

CLOUDINE MATOLA

The mining sector in Zimbabwe has found 2023 to be extremely difficult due to declining commodity prices and increased production costs as a result of crippling power outages, Chamber of Mines of Zimbabwe CEO, Isaac Kwesu has said.

A long list of issues, including reduced profits, declining revenue, soaring operating costs, cash conservations, and lower commodity prices, also beset the mining houses, making their list of woes quite lengthy.

Despite having paid for the electricity in advance, which meant they should have had continuous supplies, the industry also struggled with severe power outages throughout the year.

The mining industry, a key driver of the economy, contributes 13% of GDP and more than 60% of annual foreign currency earnings.

With about 60 distinct minerals, it is very diverse, with platinum group metals (PGM), chromium, gold, coal, and diamonds being the most significant.

The declining prices of commodities made the past 12 months extremely challenging for the mining industry, according to Kwesu.

Kwesu added that the sector’s revenues were less than it was the year before as a result of the decline in commodity prices.

“Generally, it was one of the most difficult years specifically on the backdrop of depressed commodity prices.  Most mineral prices in the past 12 months were very depressed. They recorded low levels in terms of pricing and revenue for minerals were equally low compared to prior year,” Kwesu told Business Times.

According to Kwesu, most mining houses  were finding it difficult to break even because operating costs were  higher than they had been the year before.

He added that, “the mining industry will probably deal with similar issues in 2024, particularly in the first half.

“We foresee the same condition to continue in the first half in 2024. The sector may continue struggling during the first half as commodity prices are expected to remain low in the first half,” he said.

In November 2023, there were fewer deliveries of gold  to the country’s sole buyer and marketer of the yellow metal, Fidelity Gold Refinery, than in the previous month, according to the latest economic report by Old Mutual Investment Group.

Deliveries in November 2023 were the lowest of any given month.

“Gold deliveries dipped 60% in November 2023 to 1.5 tonnes. The decrease resulted in the lowest monthly delivery for the year and reflects a 61% decline from the comparable period in 2022.

“Cumulative gold deliveries to November 2023 reached 27.7 tonnes, with small-scale miners contributing 62% of the total deliveries. The cumulative deliveries are 16.9% lower than the 33.29 tonnes achieved in the comparable period last year,” Old Mutual said.

The 2024 Mining Survey report also states that the high cost structure and softening commodity prices in 2023 caused a 15% average decline in profitability for the majority of mining companies. About half of the survey participants said they were now  struggling  to break even.

Due to the severe power outages that have plagued the mining industry this year — which can last up to 18 hours a day — the majority of mining companies are forced to use diesel generators, which are costly because of rising fuel costs. Due to the high and unaffordable ZESA tariffs, many mining companies were also impacted by the increase.

Furthermore, according to the survey report, when mining executives were asked about the profitability prospects for their businesses in 2024, the majority of respondents said they expected their profitability to decline in comparison to 2023, with the majority of those who said they expected it to stay the same coming from the gold sector.

Additionally, according to the mining report, the softening of commodity prices is expected to cause mineral revenue to decline by an average of 10% in 2024, after declining by roughly 20% in 2023.

However, export revenue from minerals, which account for nearly 80% of the nation’s merchandise exports, decreased by 2.3% to US$4.1 billion in the first nine months of 2022 from US$4.2 billion. This decrease was mostly caused by the continued decline in the price of major commodities, particularly Platinum Group Metals.

Additionally, Kwesu stated that tax and fiscal charges hindered the mining industry’s output this year and are predicted to continue in 2024 since they were not resolved.

The difficulties that the mining sector faced this year appear to be threatening the industry’s projected earnings of US$12bn.

However, because of continued investments in PGMs, gold, coal, and lithium, among other things, the mining industry is predicted to grow by 7.6% in 2024 as opposed to 4.8% in 2023, according to the budget statement for that year. In the medium run, the industry is predicted to continue growing at a rate of 4.9% and 4.8% in 2025 and 2026, respectively.

The ministry of mines and mining development will be  given ZW$132.7bn  by the government, according to the budget statement, to carry out the administrative and legislative changes that create a favorable atmosphere for mining and beneficiation.

The government intends to develop a comprehensive policy framework that forbids the export of raw minerals in order to advance beneficiation along with the mining value chains and promote job creation throughout the loop.

Furthermore, the framework will be created in accordance with the artisanal miners’ strategy, the beneficiation and value addition policy, and the minerals development policy.

Treasury has also set aside  ZW$13.3bn  to expedite the rollout of the computerized mining cadastre  information management system, which is scheduled for completion in 2024. The system will improve transparency and accountability in the mining claims, strengthening property rights and security of tenure.

 

 

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