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Zimbabwe Mining Report Q2 2009


Description: Zimbabwe Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Zimbabwe mining industry

The mining sector, along with every other key economic sector in Zimbabwe, continues to be affected by the political situation in the country. Following months of stalemate and tough negotiations, the opposition Movement for Democratic Change (MDC) and Robert Mugabe's Zimbabwean African National Union-Patriotic Front (ZANU-PF) finally formed a new coalition government in the middle of February 2009. While a positive development in itself, the list of challenges that the new unity government faces is long, and a renewed breakdown can by no means be discounted over the coming months, with the most potent threat coming from the military (for more detail, see the Political Environment section of this report). It should also be reiterated that Zimbabwe still suffers from hyperinflation 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.

Gold sector liberalised

One recent positive development was the announcement by the central bank in February 2009 that it would relinquish its role as mandatory sales agent for gold sales. At the same time, it was announced that gold miners would be allowed to hold on to foreign currency earnings. These moves will provide a badlyneeded shot in the arm to the depressed gold mining sector. Already, Mwana Africa has said that it will look to restart production at its Freda Rebecca mine as a result of these liberalising moves.

Global overview

On page 9 of this report, BMI examines the phenomenon of increased Chinese activity in the global mining sector and what this means for the industry moving forward.

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 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$0.18bn, 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

Special Focus: Outlook For Global Mining
Table: Biggest Chinese Acquisitions In Australia Since 2005
Table: Global Mining – Top Five Companies By Market Capitalisation (US$mn)
Table: Global Mining – Key Players’ Future Investment Plans (selected projects)

Industry Trends And Developments
Overview
Table: Mines In Zimbabwe
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

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: 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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