SEVEN in every 10 mining companies operating in Zimbabwe are expecting their profits to tumble in the coming year due to weakening commodity prices despite ramping up output, a new study has shown.
According to the Mining Industry Survey Report for 2024, most large-scale mining companies struggled to break even this year due to myriad challenges such as softening commodity prices and an unstable macro-economic environment.
The mining industry continues to be an important sector in the Zimbabwean economy. The government’s economic blueprint, the National Development Strategy 1 (NDS 1), accords the mining industry a central and important role.
“Analysis of survey responses shows that mineral revenue for 2023 is set to decline by approximately -20% and is expected to further decline by an average of -10% in 2024 due to softening commodity prices,” reads the survey which was commissioned by the Chamber of Mines of Zimbabwe.
“Despite most mining companies planning to ramp up production to compensate for revenue losses due to low prices, the production increase will be more than offset by the decline in prices.”
In terms of distribution of mining companies’ revenue, payments to suppliers, electricity bills, government and employees are consuming approximately 88% of mining companies’ revenues.
Survey findings also show that prospects for mineral output growth for 2024 are generally higher than those recorded for 2023.
“Most of the mining executives (95%) are planning to ramp up production in 2024 to compensate for anticipated revenue losses due to prevailing and expected softening mineral prices,” the survey shows.
“Only 5% indicated that production for 2024 will be the same as 2023. Respondent mining executives also indicated that the projected 2024 production targets will be largely supported by ongoing expansion projects. Analysis of production projections across mineral sub-sectors shows the following average output growth rates for selected minerals.
“In line with the projected mineral output growth for 2024, survey findings show that average capacity utilisation is expected to reach 90% in 2024 compared to 84% in 2023. Key sectors anticipated to drive the improvement in capacity utilisation in 2024 are gold, ferrochrome and coal.”
Survey findings show that profitability for mining companies declined by an average of 15% in 2023 due to softening commodity prices and high-cost structure.
“Approximately 50% respondents reported that they were now struggling to break even. When interrogated on profitability prospects for their businesses in 2024, most respondents (70%) indicated that they are expecting their profitability to worsen compared to 2023,” the chamber says.