How small miners are making big plays in Zimbabwe

ASX-listed Prospect Resources Executive Chairman Hugh Warner (L) and Executive Director Harry Greaves

WITHIN hours of Emmerson Mnangagwa being inaugurated, Harry Greaves, executive director of Prospect Resources, got a call from the Ministry of Mines.

The Government wanted to know how Arcadia Mine, a lithium project that had up to that point been delayed by bureaucracy, could get off the ground as soon as possible.

“Within 24 hours of the President being inaugurated, we were contacted by the Ministry of Mines. They asked us, ‘how could we be of assistance to bring this project into production faster’. Which is really extraordinary,” Greaves told the BBC in a recent interview.

Now Prospect Resources is scheduled to break ground on the mine in the next few weeks. When in full production, the mine expects to export 240 000 tonnes of lithium concentrate every year, earning $150 million per year.

That early call to Greaves is no big surprise. Prospect Resources, listed on the Australian Stock Exchange, represents how mid-cap companies, called junior miners, have moved in swiftly to occupy ground in Zimbabwe, well ahead of big-name resource firms.

Just as elsewhere in Africa at the moment, junior miners, more nimble and swift on decision making, are staking claims to prize assets ahead of the more cautious and conservative larger firms.

Across the continent, larger miners have held back on new acquisitions. They had to slow down merger and acquisition activity after weak metal prices and underperforming assets caused many write-downs on investments. Instead, they retreated and focused on cutting costs in their existing operations.

Juniors step up

Over recent years, junior miners have stepped into that gap. There are many of them, vying for resources. Canada and Australia each have over 200 junior companies listed on their stock markets, each of them hungrier than the other for exploration projects across Africa.

They have higher risk appetite, and they know the less risk averse seniors will always come knocking for a piece of the pie when the going gets good. For some large miners, it makes sense to partner with smaller explorers. Instead of spending millions on full exploration plans, they get to spend far less by partnering smaller miners, just to get a foot in the door.

And, just as in that call to Greaves, other Governments elsewhere are also actively courting smaller firms. In 2017, India launched a model to boost private capital in mineral exploration. The Indian Government invited up to 40 mining juniors to put in proposals to float special purpose vehicles for exploration projects, in partnership with the State.

The Australian Government last year invested A$100m just to encourage greenfield mineral exploration by juniors.

Many who are observing Zimbabwe’s investment climate have been watching for big name players, to validate Mnangagwa’s often exaggerated claims of billions in investment commitments. The absence of big names has led to talk that no actual mining investment has been realised.

However, in reality, a flurry of real investments as been made by junior miners, much of it under the radar.

Juniors rush in

Some activity

We list some of the activity here:

  • Prospect Resources has broken ground on Arcadia Mine, in Arcturus. They have raised $55m on the Australian Stock Exchange (ASX) for that purpose. Prospect has contracted a local company, JR Goddard, as the construction contractor, and DRA to provide engineering services and upfront design for the project. First concentrate is expected in the second quarter of 2019. Prospect has also exercised an option to buy Good Days, a lithium resource near Mutoko.
  • Separately, Prospect has opened a new lithium carbonate pilot plant at Kwekwe, where the company has begun producing 99.5 percent battery grade lithium carbonate.
  • RioZim is investing $150 million to build a new lithium carbonate plant at a cost of up to $150-million.
  • Invictus Energy, an oil and gas explorer listed on the ASX, has secured 80% of a potential oil and gas find at Muzarabani, in the Cabora Bassa basin. The company has begun exploration at the site.
  • Vast Resources, listed in New York and London, invested in Eureka Mine in Guruve. The mine had been mothballed for almost a decade, but dewatering has now begun and full operation is expected this year. Vast Resources’ 25 percent-owned group company Dallaglio acquired a 95 percent interest in Delta Gold Zimbabwe, which owns the mine.
  • London-listed Botswana Diamonds signed an MoU with Vast Resources to jointly prospect for diamonds in Zimbabwe. The deal was a “first step” into the country, according to Botswana Diamonds MD, James Campbell.
  • After Government dropped the Indigenisation law in December 2017, Caledonia is increasing its shareholding in Blanket mine. The Toronto-listed firm is raising fresh capital via rights issue for expansion at the gold mine.
  • Latitude Consolidated, another Australian firm, bought 75 percent of a lithium project in Gwanda. Production starts in the third quarter of 2018. Latitude raised the money via a 138 million share placement on the ASX.
  • Cadence Minerals, a UK resources company, has invested $5.1million into Premier African Mineral’s Zulu lithium project, 80 kilometres from Bulawayo. Premier African Minerals is listed on the LSE’s AIM-exchange. A scoping study on the project has reported targeted production of 84 000 t/y of spodumene concentrate and 32 500 t/y of petalite with gross revenues estimated at $1-billion.
  • Six Sigma, another ASX entity, announced it had taken “taken advantage of the new mining-friendly establishment in Zimbabwe to lock-in a first mover advantage” as it acquired an 80 percent stake in a lithium-rich Shamva project, and in a separate vanadium-titanium project.
  • Lithium Consolidated Mineral Exploration, listed on the ASX, has recently been granted seven new lithium projects in the Mutare Greenstone Belt. The projects comprise 29 granted prospecting licences and another 19 under application.

Controversy

The rush for Zimbabwe’s resources has not been without controversy.

One of the first miners to visit Mnangagwa’s office was Phoevos Pouroulis, son of billionaire Loucas Pouroulis and patriarch of the family that owns Tharisa Resources. Months after that meeting, it was announced that the Government had signed a $4.2 billion platinum deal with Karo Mining, which was really a special purpose vehicle for Tharisa.

Karo is to build a mine on 23 903 hectares released by Implats as part of a deal that secured the platinum miners’ claims in Zimbabwe. Once the land was secured, Tharisa then paid $4.5 million for a 26 percent stake in Karo Mining. In turn, Karo Mining holds 50 percent in Karo Platinum, with a Government vehicle holding the other 50 percent.

Tharisa also announced, separately, the acquisition of a 90 percent stake in Salene Chrome Zimbabwe.

While Tharisa was introduced as Karo Resources, resulting in initial doubts, the company operates a profitable mine on South Africa’s Bushveld Complex, has two PGM and chrome processing plants, and even has a generous dividend policy. The company is hungry for growth and Zimbabwe has provided Tharisa’s first real outlet for expansion away from South Africa.

Where to now?

Since being appointed Mines Minister, Winston Chitando has probably now lost count of the number of investment conferences he has attended, selling Zimbabwe as ripe for resource investment. However, by his own admission, what Zimbabwe needs most at the moment is investment in exploration.

Because of years of isolation, Zimbabwe knows very little about how much in resource wealth it actually has. This makes Zimbabwe harder to sell to investors. However, on the other hand, it makes Zimbabwe attractive to those investing in exploration.

And, among those willing to drill and seek out this new frontier, are mid-caps like Prospect Resources. So far, Prospect has done 25 000 metres of exploration drilling, which has proven that the mine sits on the sixth biggest lithium resource in the world.

These are the sort of numbers attracting mid-tier firms to Zimbabwe.

Some expect FDI to come in the form of big foreign investors, marching into the country in a loud, long carnival-style convoy. Instead, foreign investment into Zimbabwean resources is being led by a column of far quieter and more nimble-footed capital.

(newZWire.live)

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