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Zimbabwe Mining Report Q1 2009


Description: The mining sector, along with every other key economic sector in Zimbabwe, continues to be affected by the strained political situation in the country. The deal in September 2008 that was intended to produce a coalition government between de facto President Robert Mugabe's ZANU-PF party and the two wings of the opposition Movement for Democratic Change (MDC) remains no closer to being implemented. The most visible reason is the failure to arrive at a mutually-agreed allocation of cabinet and executive posts, but there are many other obstacles standing in the way. The political instability is continuing to have a dire impact on the mining industry and the country as a whole, with the Zimbabwe still suffering from hyper-inflation and frequent power shortages. The Zimbabwean dollar is no longer widely accepted as a valid source of any real value, and the economy now only deals in the South African rand or the US dollar.

However, the geology of Zimbabwe is very richly endowed. Of the 40 known metals and minerals that it is home to, gold, platinum and chrome form the principal endowments. The country’s gold reserves are among the largest in the African region, while it hosts the second largest platinum reserves in the world.

Another segment that has caught the attention of miners in Zimbabwe is diamonds, after the discovery of a number of significant kimberlites. However, in October 2008, Zimbabwe’s gold output slumped to an all time low of 125kg. The sector has basically shut down as the mines are starved of funds with which to carry on production. At peak production levels, Zimbabwe used to produce 2,400kg of gold monthly, illustrating how far the country has fallen. Gold accounts for a third of Zimbabwe’s export earnings, which is vital considering the instability of the currency. By October 2008, mines were owed in excess of US$30mn by Reserve Bank of Zimbabwe. The country’s largest gold miner Metallon Gold was owed US$20mn alone, forcing it to close five mines in the country, and it is now inactive. Meanwhile, apart from the lack of funds from the RBZ, Zimbabwe’s mines are also plagued by a shortage of foreign currency, with which to buy essential materials, frequent power cuts and staff problems.

Industry Forecast
Frequent power cuts, a shortage of foreign currency and labour shortages are further country-specific factors which are having a hugely negative impact on the sectors performance. Coupled with this the slump in global metal prices is forcing mines to cut back production. Under these conditions, it is no
surprise that BMI is pessimistic about the prospects of Zimbabwe’s mining sector in the short term.

Indeed, in 2008 we estimated that the sector fell by almost 6% in real terms, while 2009 should see a further decline. Two areas which look particularly stricken are gold mining and nickel. The former is on the verge of collapse due to funds being withheld by the Reserve Bank of Zimbabwe. Meanwhile, the country’s largest nickel producer has shut all its mines in November 2008 due to falling prices for the metal.

However, the nation has abundant mineral resources and a well-developed, albeit deteriorating, infrastructure network. In this sense, there is hope that the country’s mining sector can begin to recover, especially when the global economy returns to growth. However, it must be remembered that many problems in the country are self-inflicted and, until the political situation resolves itself, it is hard to hold anything but a negative prognosis. In 2013, we expect the industry to be worth around US$0.53bn, although this depends on how the currency will fare over the next five years.


Contents: Executive Summary

Zimbabwe Political SWOT
Zimbabwe Economic SWOT
Zimbabwe Business Environment SWOT

Industry Trends And Developments

Overview
Table: Mines In Zimbabwe
Latest Developments
Regulatory Structure And Developments
Latest Developments

Key Projects

Metals
Iron
Gold
Chrome
Nickel
Platinum
Minerals
Coal
Diamonds

Business Environment

Regional Mining Overview – Africa
Table: Africa Mining Business Environment Ranking
Limits To Potential Returns
Risks To Realisation Of Returns
Legal Framework
Labour Force
Table: Zimbabwe’s Demographic Indicators, 2000-2030
Foreign Investment Policy

Political Environment

Industry Forecast Scenario

Metals Price Outlook
Table: Stock Levels At London Metals Exchange Warehouses (tonnes)
Global Industry Overview
Regional Analysis
Zimbabwe’s Mining Industry Forecast
Table: Zimbabwe’s Mining Industry, 2005-2012

Competitive Landscape

Table: Key Players In Zimbabwe’s Mining Sector

Company Monitor

Zimbabwe Platinum Mines
African Consolidated Resources
Hwange Colliery Company (HCC)
Caledonia Mining Corporation

Country Snapshot: Zimbabwe Demographic Data

Section 1: Population
Table: Demographic Indicators, 2005-2030
Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Table: Education, 2000-2003
Table: Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Table: Employment Indicators, 1997 And 1999*
Table: Average Annual Manufacturing Wages, 1996-2002

Appendices

Appendix A: Global Assumptions
Global
Table: Global Assumptions, 2007-2013
Economic Activity
Table: Global And Regional Real GDP Growth, 2006-2012 (% change y-o-y)
Table: Developed States’ Real GDP Growth, 2008-2010
Table: Emerging Markets’ Real GDP Growth, 2008-2010
Monetary Policy
Table: Developed Market Exchange Rates, 2006-2010 (average)
Table: Emerging Market Exchange Rates, 2006-2010 (average)
Commodities
Appendix B: Country Snapshot: Zimbabwe Demographic Data
Section 1: Population
Table: Demographic Indicators, 2005-2030
Table: Rural/Urban Breakdown, 2005-2030
Section 2: Education And Healthcare
Table: Education, 2000-2003
Table: Vital Statistics, 2005-2030
Section 3: Labour Market And Spending Power
Table: Employment Indicators, 1997 And 1999*
Table: Average Annual Manufacturing Wages, 1996-2002
Appendix C: Regional Demographic Data
Table: Regional Economic Data, 2000-2007
Table: Population, 1995-2030
Table: GDP, 1990-2007 (US$bn)
Appendix D: Business Environment Ratings
Ratings Overview
Table: Mining Business Environment Indicators
Table: Weighting Of Components


Companies Mentioned - Zimbabwe Platinum Mines - African Consolidated Resources - Hwange Colliery Company (HCC) - Caledonia Mining Corporation


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