Cash Squeeze

Windhoek ‑ Zimbabwe Mining Development Corporation (ZMDC) is still struggling to recapitalise mining projects, re-open some of its operations and to finance stand-alone mining projects, despite sitting on some of the country’s richest deposits of diamonds, gold, chrome and platinum.
The state-owned mining company, established in 1982, digs for gold and diamonds, and lack of capital is stalling plans to start new projects in platinum and chrome while reviving tin and copper mining operations closed decades ago.
ZMDC also wants its Kamativi Tin Mine, Mhangura Copper Mine and processing plant and Sanyati Copper Mine re-opened but has no money for capital projects.
While the parastatal attributes some of its problems to lack of capital, its cash flows have become a contentious subject with the national treasury, which channels the revenue generated towards financing public expenditure.
Management admits that its cash woes are made worse by the fact that ZMDC is not custodian to its finances.
Run down over the past decades, with successive government-appointed managers failing dismally to infuse momentum in what was once the pride of state-owned mining companies in Africa, ZMDC’s chances of securing credit on the capital markets remains a pipe dream.
Jerry Ndlovu, ZMDC MD, attributed the company’s failure to raise finance from abroad to sanctions while the high cost of borrowing in Zimbabwe prohibits borrowing for long-term capital projects.
“In the short-term market interest rates in the country are high and currently being under sanctions, ZMDC has challenges in borrowing from international institutions,” Ndlovu told The Southern Times.
“Money that is coming from other mining activities is being channelled into the fiscus, leaving little for recapitalisation.
“In the medium- to long-term, trends are that the sanctions and restrictions will be removed and ZMDC will be able to access competitive borrowing rates from the market.
“The corporation will implement more of its projects on its own. This is our objective,” Ndlovu stated.
ZMDC owns Sabi, Jena and Elvington gold mines. It wholly owns Marange Resources, which mines diamonds in the eastern parts of Zimbabwe.
The company is also in a diamond-mining joint venture with Mbada Resources, which is also mining in the eastern district’s diamond fields.
It currently has 20 joint ventures and management says these partnerships can be used to propel the company into the top 10 mining companies on the continent.
Apart from gold and diamonds, ZMDC also has joint ventures in platinum and chrome mining.
However, progress at Bokai platinum project, which promises to be one of the largest platinum mines in the country, has been slow.
The mining parastatal is jointly developing Bokai with UK-listed Khazakh metals major, Eurasian Natural Resources Corporation (ENRC).
Management does not provide clarity on when Bokai will come on stream, and as with all its projects, it all comes down to whether the company can mobilise its share of capital to finance mine development.
“The feasibility studies were completed. Two twin declines have been developed to ore body. Mobilisation of resources to commence construction of plant is underway.
“Production is expected at least 24 months from commencement of plant construction,” Ndlovu said.
ZMDC is the controlling shareholder in Todal, Ruschrome, Northridge and Maflox Mining, which are also into platinum group metals (PGMs).
“ZMDC is involved in a number of projects in platinum, which are expected to define returns as soon as they commence production,” Ndlovu explained.
Its chrome claims, in which it has joint ventures with Wambao, Star Mining and Russziim, are yet to be exploited.
“Chrome mining in Zimbabwe is currently mostly dormant following government strategic direction to have the chrome beneficiated before export to get maximum benefit from its mining activities.
“Subsequently these companies had to reposition themselves in the value chain,” Ndlovu said.

 
Closed Mines

The company hopes to piggyback on joint venture partners to re-start operations at Kamativi Tin Mine and the two copper mining and processing operations, Mhangura and Sanyati.
Kamativi Tin Mine was shut down in 1994 when prices of metals bottomed out.
ZMDC says that it requires US$36 million to re-open the mine and one metallurgical plant, which has capacity to process 50 000 tonnes of ore per month.
An additional US$60 million would be required to finance the re-start of two other plants, trebling monthly production to 150 000 tonnes.
Ndlovu said that before its closure, Kamativi produced tin and beryllium and if production is resumed, tantalite and lithium will be added to the suite of minerals to be produced.
“Approximately 30 million tonnes of dump material with tin, tantalite and lithium is sitting on the mine. This is in addition to the hard roc resource in the Kamativi claims.
“The first phase of the revival involves delineation of and classification of mineral resources on the property. At 150 000 tonnes per month, Kamativi will exceed pre-closure capacity,” Ndlovu said.
Revival of Kamativi has been on the cards for decades and efforts by the state-owned company to secure a partner have seemingly faltered at each and every turn.
Currently five companies are interested in Kamativi, and two of those conducted due diligence exercises in January and February this year.
Due diligence exercises on both parties will be concluded in April, thereafter, contractual negotiations are expected to start.
ZMDC hopes to secure a joint venture partner for Kamativi around in the coming two months, after which work on resource confirmation, going simultaneously with rehabilitation of infrastructure in the second half of the year will start.
Kamativi will then be expected to start processing material from the tailings dump in 2014, Ndlovu said.
So huge is the investor appetite for the ZMDC’s mothballed operations that it received 30 bidders for joint ventures in Mhangura and Sanyati.
These have now been narrowed down to six bidders and management says it is wrapping up the selection process.
But the state-owned company admits it does not know whether Mhangura, which at one time mulled toll refining copper concentrates from the Democratic Republic of Congo (DRC) and Zambia to remain afloat, still holds any mineral potential.
Mhangura shut down the mine and copper processing plant around 2000 when it ran out of commercially viable ore.
“The joint venture partnerships will firstly carry out exploration on all the copper tenements followed by feasibility studies to assist with the decision making process.
“The selection process for the joint venture partners will be completed at the end of March 2013.
“Sanyati Copper Mine is the pool of properties currently being looked at by the potential investors interested in Mhangura,” Ndlovu said.
The state-owned company says that Zimbabwe has the right geology for deposits of PGMs, gold, iron ore, copper, nickel, coal, tin, tantalite chrome and uranium.
“The most attractive aspect for Zimbabwe is that the country is largely under-explored. This bodes well for attraction of exploration and mining investment funds,” the ZMDC MD said.

March 2013
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