SA miners cast their eyes over the border

Zimbabwe mining

Sentiment on Zimbabwe is improving with potential investors looking for business opportunities while monitoring political developments closely. But some miners are already moving in on SA’s northern neighbour with zeal.

Zimbabwe was starved of foreign direct investment under former president Robert Mugabe and his contentious indigenisation law, which required businesses to be majority-owned by locals. Under then acting president Emmerson Mnangagwa, whose win at the polls is the subject of a court case this week, the law was amended in a bid to open up the economy to new investment.

The only exception to the amended laws are the diamond and platinum mining sectors where only 41% of such operations can be foreign owned. Even so, Impala Platinum, which will cut jobs and shut shafts at its Rustenburg operations, has expressed excitement about an “obvious” expansion opportunity for its Zimbabwe operations.

Resources group Tharisa has moved strongly into Zimbabwe this year with recent purchases of a 28% stake in a platinum project, and 90% of Salene Chrome Zimbabwe.
African Chrome Fields, under the unlisted Moti Group, is expanding its alluvial chrome operations in Zimbabwe. This will be done in part through a programme called Motivation Mining, which seeks to formalise subsistence chrome mining in Zimbabwe. The initiative began only two months ago as it could not get started under the Mugabe regime.

Moti Group is also looking to sell $500m of its own shares. Because it was invested in a number of Zimbabwe businesses, it offered new investors a way into the country, said CEO Zunaid Moti.

John Meyer, a mining analyst at SP Angel, has just come back from Zimbabwe, where he saw chrome, gold, lithium, vanadium and other mineral opportunities. “The government is hugely supportive,” he said.

Meyer said that Zimbabwe’s ministry of mines had been offering licences back to Western mining companies — which had assumed their licences might have been long lost — in a move that might be intended to oust Chinese companies exploiting Zimbabwe’s resources while avoiding taxes.

Things were looking up for exploration, he said. “Mugabe’s selfish decimation of the economy has made it tough to source local services and expertise, though problems in South Africa are persuading engineering talent to increasingly look to Zimbabwe for new opportunities.

“This is helping local entrepreneurs to get exploration and mines going again.”
Jee-A van der Linde of NKC African Economics said while there had been a serious uptick in investor interest in Zimbabwe since the beginning of this year it was in sectors that generated foreign exchange, such as agriculture, mining and tourism.

The government also provided support facilities that tended to favour these industries, which were prioritised in a bid to address the country’s liquidity constraints, Van der Linde said.

Other sectors had garnered less investor interest. “Severe foreign-currency shortages make it nearly impossible for the manufacturing sector to remain competitive, as manufacturers are unable to import key inputs,” Van der Linde said.

“Continuous downtime due to electricity outages also exacerbates the situation.”
Warren Beech, partner and global head of mining at law firm Hogan Lovells, said that while Zimbabwe was certainly being talked up as a hot investment destination, with access to mines and the minister part of the package, one had to differentiate between talk and hype, and real opportunities.

“There is a fair amount of high risk,” he said.

“It presents a good opportunity for those already there who already understand the risk of doing business — like Impala Platinum, which can expand its Zimplats operation relatively easily,” said Beech.

“New investments are probably still risky for new entrants, and new mining legislation is still being drafted.”