Not digging the risk: ‘We could be doing more in Zimbabwe, but conditions not yet ideal’ – Implats CEO

Implats CEO, NIco Muller

Zimbabwe wants to grow its mining sector to US$12 billion by 2023. However, words of caution and doubt by one of the country’s biggest investors shows that the country is yet to win over the big firms that the country needs to match its grand ambitions.

Nico Muller, CEO of Implats, which holds an 87% stake in Zimplats and jointly runs Mimosa, says his company is “a happy investor” in Zimbabwe. The company is redeveloping two new mines in the country, and Implats sees Zimbabwe as a growth area.

But, according to Muller, Implats could be doing much more, including building a refinery, if Zimbabwe did more to improve its investment climate.

Zimplats’ current capital projects will increase mining capacity by 14% – a total of 40,000 tonnes of ore per month – from 2022. This expansion would make a good case for Zimplats to increase its refining capacity inside Zimbabwe.

Implats, says Muller, could “play a role by providing shared processing potential in concentrate or refinery capacity”. However, this can only be in the long term, and not now, he added.

Zimbabwe’s investment climate remains “not ideal” for investment of that size, Muller says. “We would be cautious to invest growth capital in Zimbabwe. It would have to be at the right time,” he told investors earlier this month.

Potential, but…

Zimplats is currently undertaking major capital projects, including the US$264 million Mupani mine and the redevelopment of the Bimha mine, for US$101 million.

But the company could be investing even more, if Zimbabwe fixes its investment climate.

On Sunday, participating in the Denver Gold Forum Americas conference, Muller again voiced his concern that Zimbabwe is not yet ready for large scale investment.

“It would be useful if the socioeconomic conditions were to improve, but we have a very positive orientation towards future potential of Zimbabwe and we see the country as a potential growth node for the company,” he said.

Despite the uncertainty, Implats would stay put in Zimbabwe. Divesting from a country where it employs thousands of workers would be “immoral”, Muller says.

Muller says Implats has not struggled to repatriate foreign currency from Zimbabwe, a factor that has discouraged many other investors.

In the financial year to June, Zimplats’ revenue increased by 38% year-on-year to US$868.9-million, mainly due to an increase in the average prices of rhodium, palladium, gold and nickel.

Country risk

Zimbabwe’s political risk profile has worsened due to erratic economic policy and political instability, which has seen the country fail to mend relations with foreign lenders. This has kept potential investors away and made it harder for existing miners to expand.

In July, the Chamber of Mines said increased country risk and central bank’s foreign currency regime has stalled expansion projects

“Mining companies are struggling to raise capital due to increased country risk. This has seen most expansion mining projects put on hold as most financiers are demanding offshore collection accounts as guarantor for capital,” the Chamber said.

Zimbabwe’s ambitious plan to increase mineral output from US$2.91 billion in 2019 to US$12 billion by 2023 is based on increased exploration and investment. The government has opened up new ground for exploration, hoping to attract new investors.

[Click to read: How small miners are making big plays in Zimbabwe]

A number of mid-tier companies have taken the bait since 2018, but President Emmerson Mnangagwa’s “Open for Business” campaign has not attracted many large investors.

The biggest new investment is the US$4.2 billion Darwendale platinum project, being developed by the Russia-Zimbabwe joint venture Great Dyke Investments.