Karo delays US$391m project due to low prices, and it’s a red flag for Zimbabwe’s big mining ambitions

Delayed: Earthworks at Karo platinum mine, Selous

Tharisa Plc says it will delay commissioning its US$391 million Karo mine in Zimbabwe until June 2025 due to low platinum prices, further signs that weak commodity prices and an uncertain global economic outlook will hurt Zimbabwe’s ambitions to boost mine investment.

Construction of the mine, on the Great Dyke in Selous, started in December last year and commissioning was expected in July next year. When complete, Karo will produce up to 194,000 ounces of PGMs per year. This would make it Zimbabwe’s third largest platinum mine after Zimplats and Unki and increase the country’s platinum output by 20%.

But low prices of platinum group metals (PGM) mean that Zimbabwe will have to wait.

“Given the current PGM basket price weakness and uncertain global economic outlook, we have taken the measured decision to extend the Karo Platinum timeline out to commissioning by June 2025, with the opportunity to accelerate the timeline as markets become more favourable,” Tharisa said Tuesday.

The Chamber of Mines warned recently that a slump in global metal prices and rising local costs are hitting mine operations. According to the Chamber of Mines, the price of rhodium is down 74% over the past 12 months. 

Platinum prices have been hit partly by fears that the EU would ban conventional cars in just over a decade. This move would slash demand for the platinum and palladium used in catalytic converters which help to cut vehicle emissions.

When planning the karo project, Tharisa had projected that at average PGM 6E prices of US$2,140 per ounce and costs of US$1,096 per PGM ounce, Karo would make a return on capital invested of 30.1% and an internal rate of return of 26.1%.

But in the year to September, Tharisa realised an average PGM basket price of US$1,893 per ounce, 26% lower than the average price of US$2,564 per ounce that it received during the same period in 2022.

Red alert

PGM major Sibanye Stillwater’s CEO Neal Froneman has warned of “significant restructuring” which could result in shaft closures and job losses in the platinum industry due to the current low metal prices.

Zimplats, the country’s biggest platinum mine, reported recently that its full-year revenue to June was down by 23% due to lower global prices. The company is investing US$1.8 billion to expand operations in Zimbabwe, but weak prices may delay some of its projects.

Efforts by Kuvimba Mining to raise capital for its Great Dyke Investment project at Darwendale, abandoned by Russian investors last year, will also be a lot harder due to low PGM prices.

The dip in metal prices is bad news for Zimbabwe’s economy, and Finance Minister Mthuli Ncube says this will contribute to slower economic growth in 2024.

The Zimbabwe government has a free-carry 15% stake in the Karo project, through the sovereign wealth fund. Free carry means that the government doesn’t have to pay for the shares or contribute any equity capital. Government also has the option to buy another 11%.

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