By Nelson Banya and Ranga Mberi
Mining was expected to be the bedrock on which Zimbabwe built its recovery. The early months of President Emmerson Mnangagwa’s leadership saw strong international interest in Zimbabwe’s largely untapped resources.
A mining investment conference held in Harare in February 2018 was oversubscribed, while a survey measuring local executives’ confidence turned positive for the first time in years.
However, foreign exchange shortages, crippling power cuts, currency policies and the slow pace of political reforms have tempered many of those hopes.
Zimbabwe’s Ministry of Finance expected the mining sector to fall by as much as 12.3% in 2019, with a recovery of 4.7% projected in 2020.
Despite concern over the sector, 2020 will be a key year for many of the companies operating in Zimbabwean mining, with several investment projects expected to move into development stages during the year.
In this report, newZWire details the main factors and companies to watch in Zimbabwean mining in 2020.
2020: Companies to watch
While the outlook remains largely pessimistic for Zimbabwean mines, there are plans for investment among companies that have invested in Zimbabwe over the past two years, and those that already had a long-term presence in the country.
Prospect Resources: Arcadia lithium project
The lithium developer is listed on the Australian Stock Exchange and listed in Frankfurt in September 2019.
The company is developing a lithium mine, Arcadia, located at Goromonzi, near Harare. Construction and development of the mine is expected from Q3 2020.
Prospect announced in December 2019 that the Africa Export-Import Bank (Afreximbank) is to arrange and manage a US$143 million project finance debt facility to fund development of Arcadia mine. The bank is to fund and hold US$75 million of the arrangement to fund development of Zimbabwe’s Arcadia lithium mine.
The company has already moved to secure markets for its future production. In 2019, Prospect announced that Uranium One, a subsidiary of Russian state-owned energy firm Rosatom, could take up equity in Prospect, as well as 51% of Arcadia’s future lithium production.
In 2018, Prospect signed an offtake agreement with Shenzhen-listed Sinomine, who agreed to buy 30% of Arcadia’s annual production over seven years. Sinomine bought equity in Prospect for US$10 million and put down a further US$10 million in advance for Arcadia’s lithium concentrates.
Karo Resources: Ngezi platinum project
Karo Resources, 26%-owned by Tharisa, plans to develop a platinum mine in Ngezi, on the mineral-rich Great Dyke. In 2019, Karo now completed a 238 exploration boreholes and 32.4 km platinum group metal drilling programme on the property and the initial resource estimate had been expected by end of 2019. The company plans to start development of its first pit in the last half of 2020.
Caledonia Mining: Shaft project in 2020
Caledonia is listed in Toronto, New York and London and runs the Blanket Gold Mine near Gwanda. The company plans to commission its new central shaft in the fourth quarter of 2020, which would take production to 80,000 ounces a year of gold by the firm’s 2022 financial year (2019 full year guidance was 53,000-56,000 ounces).
In December 2019, Caledonia upped the dividend by 9.1% to reflect “increased confidence in the outlook for our business”.
Once the shaft deepening project done, Caledonia will be left with extra cash, which will not only be spent on shareholders, but likely also on new projects.
“If you believe things will be better in five years’ time, you have to get in now,” Mark Learmonth, Caledonia’s CFO, told Reuters in 2019. “We’re not talking about a big, producing mine. We’re talking about advanced exploration or brownfield, but with good prospectivity. We plan to redeploy some of the surplus cash to be generated by the Blanket Mine.”
Alrosa: Diamond JV for Manicaland
The world’s largest diamond producer by output, Russia’s Alrosa, has finalised a joint venture with the Zimbabwe Consolidated Diamond Company (ZCDC) for the exploration of diamonds in the country.
The JV is to initially target prospecting in Chimanimani, on claims that were previously held by DTZ-Ozgeo, another Russian joint venture.
The claims were ceded to ZCDC in 2018. Alrosa has already committed US$12 million to the two-year exploration exercise, according to Vladimir Marchenko, Alrosa’s deputy chief executive in charge of Africa.
The JV has begun geological exploration of greenfield deposits, before extending into diamond mining and the sale of rough diamonds. The company has already applied for a number of greenfield licences.
Great Dyke Investments (GDI): Darwendale platinum project
A 50-50 partnership between Afromet JSC – which is 100%-owned by Russia’s Vi Holdings – and Kuda Tagwirei’s Landela Mining Ventures, GDI is a project to develop a platinum project at Darwendale. The first phase is expected to cost US$500 million, targeting annual output of 280,000 ounces of platinum group metals and gold. Mine construction is expected after the financial close, which is expected by March 31, 2020.
The African Export-import Bank was appointed as the main financial partner and lead arranger for the project. The continental bank has put up US$192 million towards the project. The project will be implemented in three phases and is expected to produce 860,000 ounces of PGM and gold per year at full capacity. To put the scale of the mine’s potential into perspective, annual output for Zimbabwe – from the country’s three PGM mines – was 978,692 ounces in 2018.
Vast Resources: JV for Chiadzwa diamonds
Listed on AIM in London, Vast Resources entered into a joint venture with the Zimbabwe Mining Development Corporation (ZMDC) in 2019 to mine the Heritage concession at Chiadzwa. Ahead of that ZCDC partnership, Vast agreed a partnership with Chiadzwa Mineral Resources, a company representing the Chiadzwa community interests in the diamond concession.
During 2019, the company sold its gold interests in Pickstone and Eureka mines to Padenga Holdings to focus on the diamond project. Vast signed a binding conditional bond issue deed for a facility of up to US$15 million, via the issuance of secured convertible bonds to UK based fund Atlas Capital Markets, funds that will be partly used to bring the Zimbabwe diamond project into to production.
The factor to watch is how the ZMDC partnership works out and Vast’s ability to raise further cash to develop the site.
Invictus Energy: Muzarabani energy prospect
Invictus Energy is an Australian-listed company prospecting for gas and oil in Muzarabani, Zimbabwe. In 2019, the Environmental Management Agency (EMA) approved Invictus’ Environmental Impact Assessment (EIA) prospectus.
Independent surveys pointed to “substantial resource potential” at the prospect. The last estimate, released by GeTech Corp on July 1, 2019, showed potential gas resources of 9.25tcf (trillion cubic feet), which would make the prospect one of the largest in the region.
However, this remains only potential, and must be confirmed by the drilling of an oil well to confirm the find. A seismic survey is planned in 2020. Invictus plans to then spend up to US$20 million to sink a well, now expected in 2021, once rigs are secured from East Africa.
The key factor to watch is Invictus’ farm-out process, where it seeks a larger partner to develop the prospect. Invictus hired UK form ENVOI to run the process.
Oil and gas projects take long to develop. Mozambique’s US$25 billion gas find, one of the largest in history, will only start production in 2024, a total of 13 years after the resource was confirmed in 2011, and following surveys done in the late 1990s.
Kamativi Tailings: Lithium development
Zimbabwe Lithium Company (ZLC) is expected complete a pilot plant and start production of lithium concentrates in 2020, after clearing legal hurdles. A term sheet was signed with Transamine Trading S.A., a Swiss based off-taker, to secure a US$9.5 million debt facility to cover capital costs of Phase 1 of the project. A flotation plant to process Kamativi tailings is expected by Q4 2020.
Zimplats: New mine development
Zimplats will continue the development of Mupani mine, which will replace two of its older mines, Rukodzi and Ngwarati mines, which deplete in FY2021 and FY2025 respectively. The project is ahead of schedule, the company has reported.
The new mine is scheduled to reach full production of 2.2 million tonnes per annum in August 2025, at an estimated total project cost of US$264 million. Of this budget, US$79 million had been spent on the project by December 2019.
A total of US$90 million had been spent on the redevelopment of Bimha mine as at 31 December 2019.
Impala Platinum: New land for expansion
In 2019, Impala Platinum began talks to buy land from rival Anglo American Platinum (Amplats), as part of a plan by the world’s second-biggest platinum producer to boost output from Zimbabwe. Impala operates the Mimosa platinum mine. Amplats’s Unki mine has two properties adjacent to Mimosa.
Metallon: Asset sell-off
Once the country’s largest gold producer, Metallon was forced to place three of its mines – Shamva, Mazowe and Redwing – under care and maintenance. On the application of unions, a court placed Mazowe and Shamva into corporate rescue, which may delay plans for a sell-off.
The assets are ripe for a takeover, but a mix of political pressure, a large pile of debt and lack of clarity on the extent of its resources have stood in the way of the mines attracting quality buyers.
Metallon founder Mzi Khumalo has been battling accusations of externalising US$31 million from the country. In turn, he has sued the Reserve Bank of Zimbabwe for what he claims are unpaid gold sales. The legal rows have led to the collapse of his relationships with Government, making his exit inevitable.
Canada-based B2Gold considered buying Shamva gold mine, but its interest cooled after Government rejected the company’s demand that it be exempted from selling its gold to Fidelity Refiners, the Reserve Bank of Zimbabwe’s gold buyer.
Shamva was last valued at US$167 million in 2012. The news to watch in 2020 is who ends up with Metallon’s assets.
Eureka Mine: Open pit mine
In 2019, Padenga Holdings acquired an interest in Eureka Mine, a long idled gold mine in Guruve, through a 50.1% shareholding in Dallaglio Investments.
Apart from Eureka, Dallaglio’s assets include Pickstone Peerless in Chegutu, whose current output is around 27,000 ounces per year. The transaction included US$19.99 million worth of mining equipment. Padenga plans to commission an open pit mine at Eureka in the second half of 2020.
ZMDC: Legal risks
The State-owned mining company faces legal risks after British Virgin Islands-based Amari Holdings won the right to seize ZMDC assets worth US$65.9 million as compensation for Zimbabwe’s cancellation of nickel and platinum ventures in 2007 and 2008. The ruling was made by the International Court of Arbitration at a hearing in Lusaka, Zambia, in 2019.
A court ruling has also barred ZCDC from selling diamonds from claims previously held by Mbada holdings.
2020: Major players
Businessman Kuda Tagwirei had a busy year in 2019, acquiring interests in key mining operations.
Sotic International, a Mauritius-based commodity company associated with Tagwirei, bought UK-listed Asa Holdings’ 74.13% stake in Bindura Nickel Company in October, 2019.
Tagwirei’s Landela Mining was announced as the 50% partner in Great Dyke Investments, which is developing the Darwendale platinum project.
In 2020, Landela is also likely to take over operations at State-owned gold mines, currently held by ZMDC. The mines were put up for sale in 2018, but Government subsequently cancelled the sale after failing to find quality investors. This withdrawal, industry and government officials say, paves way for Landela to gain control.
Tagwirei is also among potential buyers of Metallon’s Shamva Mine. The acquisitions would extend Tagwirei’s influence in the resources and commodities business, where he already holds interests in Africa Chrome Fields and has bid for ferrochrome producer Zimbabwe Alloys.
Bravura, an exploration company owned by Nigerian billionaire Benedict Peters, was in 2019 awarded exploration contracts and access to develop the Serui Concession, just south of the Hartley complex on the Great Dyke.
“Bravura holds legal and rightful titles to exploit some platinum claims in Zimbabwe awarded to it after interests ostensibly held by the previous owners were forfeited by the Ministry of Mines as a result of their non-performance of key statutory and commercial obligations,” the company said in 2019. The company has recently posted adverts for graduate trainees in engineering.