Business

Mining firms to ramp up production

Martin Kadzere
Senior Business Reporter
Zimbabwean mining companies are looking at increasing production by as much as 30 percent next year on the back of stable macro-economic environment currently obtaining, a new report shows.

The mining industry is the country’s largest foreign currency earner, accounting for about 65 percent of exports and is one of the key sectors designated for short to medium term economic revival.

Last year, the Government launched a mining roadmap that is expected to lift revenue from minerals such as gold, platinum and coal to US$12 billion by the end of 2023.

The latest report on the state of the mining industry and prospects for 2021 commissioned by the Chamber of Mines of Zimbabwe, a lobby group that represents local miners, shows that 90 percent of the companies surveyed are looking at expanding production by between 10 and 30 percent next year.

Ninety percent are planning to ramp up production in 2021 while 10 percent expect to remain the same.

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Of the respondents that are expecting to increase production, approximately 40 percent are expecting to ramp up production by more than 30 percent.

About 10 percent expect to increase output by between 10 and 30 percent, according to the report.

Consequently, output is expected to grow by an average of 3 percent for platinum group metals to as high as 33 percent for ferrochrome.

“The scenario was premised on the assumption that access to capital will remain a challenge just like in 2020,” the report says.

When further interrogated what would happen if access to capital improves, respondents indicated that they will be able to further grow their output average nearly 40 percent, led by chrome, coal and diamonds.

However, mining executives remain pessimistic about the prospects of raising fresh capital due to illegal sanctions induced uncompetitive investment environment, high cost of doing business and perceived country risk.

Capacity utilisation for 2021 is expected to reach a five year record of 80 percent, from 61 percent expected this year. In terms of profitability, most companies are looking at making profits in 2021.

Most companies expect that Covid-19 will be contained in 2021 with 50 percent of the respondents indicating that it will take them less than three months to recover to 2019 operating levels while 10 percent said it will take three to six months.

“Mining executives are expecting improvement in global commodity marketing in 2021, with 90 percent of respondents indicating that they are optimistic of a favourable commodity market in 2021 on the back of anticipated improvement in the Covid-19 situation,” said the report.

“About 10 percent are sceptical about market conditions in 2021 and expect the Covid-19 situation and depressed demand specifically for base metals to persist in 2021.”

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Covid-19 movement restrictions resulted in many international airlines being grounded and national borders closed in an attempt to contain the disease.

As such, many foreign agents were unable to travel and even movement of cash was affected from source markets.

 

HERALD