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Failure to secure capital hampers mining

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THE Chamber of Mines of Zimbabwe (CoMZ) says the mining sector is operating below capacity, with miners struggling to secure capital for development projects as well as to raise money for electricity payments.

DUMISANI NYONI

The mining sector is one of the country’s biggest foreign currency earners alongside tobacco.

In an interview with The NewsHawks, CoMZ chief executive officer Isaac Kwesu said the largest threats facing the industry included the Covid-19 pandemic which disrupted supply chains and markets, inadequate foreign currency and logistics, among others.

“The industry is operating but under challenges, just like other sectors in the economy. The Covid-19 pandemic has been a big challenge and we also had other issues surrounding capital which some mines are struggling to secure specifically for the developmental projects,” Kwesu said.

“There are certain issues also regarding logistics and adequate foreign currency to meet payments such as electricity. The Zimbabwe Electricity Supply Authority (Zesa) needs to be paid 100%. So, we have challenges where miners are struggling to raise 100% monies to pay for Zesa as well as other key raw materials.”

According to the chamber’s State of the Mining Industry report, the mining sector is operating at below capacity because of Covid-19-related challenges, power outages, inadequate foreign exchange allocations, capital shortages, high cost structure and obsolete equipment.

The report also indicated that the majority of respondents (90%) indicated that they were facing difficulties in raising capital for both sustenance and ramp up. About 80% reported that they put on hold some of their planned projects in 2020 due to capital shortages.

Also, about 50% of the respondents proposed an electricity tariff of US 4cents per kilowatt hour to US6c/KWh, with the highest tariff not exceeding US8c/KWh.

“The situation is not optimal. We are operating and happy but not at full capacity because of Covid-19 and also other challenges,” Kwesu said.

On production outlook, Kwesu said: “Assuming there are no disturbances that we are currently facing and we will be able to cover the lost ground, if the environment improves we always aim to produce more than the previous year.”

“We want growth and more earnings, but we have to manage under the prevailing condition,” he said.

According to the Reserve Bank of Zimbabwe, gold deliveries to Fidelity Printers and Refiners for last year amounted to 19.05 tonnes, down 31% compared to the same period in 2019.

In value terms, gold exports declined by 6% from US$1.1 billion in 2019 to US$994.7 million in 2020.

CoMZ’s survey findings show that average capacity utilisation for the mining industry was at around 61% in 2020, compared to 70% in 2019. Most key minerals recorded declines in average capacity utilisation in 2020 compared to 2019.

Only the coal sector recorded an increase in capacity utilisation while the platinum sector continued to operate at around 100%.

In 2021, all key sector respondents indicated plans to increase capacity utilisation, with the average capacity utilisation for the industry expected at 80% in 2021, it said.

About 50% of respondents indicated that it would take them less than three months to recover to 2019 operating levels while 10% would take them three to six months while another 10% would require six to 12 months to recover.

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