Green shots appearing in Zimbabwe
After a tumultuous 2010, where human rights abuses within the Zimbabwe mining industry were brought to the world's attention, mining investment companies report that green shoots are starting to appear, though under continued political constraint.
The country has still not managed to extricate itself from the scathing attack on its diamond debacle by global human rights watchdog Global Witness.
This attack led the diamond industry regulator, the Kimberley Process (KP), to make Zimbabwe the focus of its attention.
After meetings in Jerusalem and Moscow, Zimbabwe voluntarily suspended itself from the KP.
Although popular thought is that the conditions precedent for Zimbabwe's unsuspension are unlikely to be met any time soon, World Federation of Diamond Bourses honorary life president Ernest Blom acknowledges that the country is "bending over backwards" to ensure that it is KP compliant, although the road ahead remains very long.
When pressed on Zimbabwe's KP com- pliance or lack of it, Blom admits that there are two schools of thought.
"One says Zimbabwe is compliant within the guidelines of the KP and the other says that, although they are compliant, there are other factors that should be taken into account. Personally, I believe that Zimbabwe is compliant in terms of the KP requirements. Over 90% of the KP participants share this sentiment," Blom reveals to Mining Weekly.
Impressed with the work done by Zimbabwe to improve mining in the Mutare region, the KP sanctioned two monitored sales of rough diamonds that included Mutare diamonds in 2010.
These auctions were well attended with 893 000 ct sold, which brought in $ 71,44- million.
Blom reports that a lot of work goes into arranging these auctions.
"The two sales that took place in 2010 were in accordance with the agreement reached with the KP at meetings held in Jerusalem and St Petersburg. This agreement also required KP monitor Abbey Chikane to satisfy himself of Zimbabwe's adherence to the requirements as well as to ensure that the rough diamonds sold during the sales came from specific production periods," says Blom.
He points out that, although the 2010 sales were well attended, there is no indication that there will be similar sales in 2011.
Another mining company which reports that not everything about Zimbabwe is as it seems is South African mining junior Unimin.
Present in Zimbabwe for the past eight years, Unimin CEO Henk Moen reports that Zimbabwe has significant untapped potential, particularly in gold, which could form the backbone of a future commodity revival.
Unimin has a tenement of about 22 km2 in Gwanda, which is in between Beitbridge and Bulawayo, where the gold is reportedly shallow enough for it to be visible in the rocky outcrops, which are prominent.
Gold mining in the area dates back to World War II, when the British left a mine shaft legacy.
Because of the nature of mining legislation in Zimbabwe regarding exploration, Unimin partner Gerhard Dreyer reports that the true extent of the resource is unknown to Unimin.
"The legislation in Zimbabwe regarding exploration is that, once a company finds a resource, it must start mining √¢‚Ç¨‚Äú exploration can be done later. However, shovel samples of surface soil suggest that the Unimin resource has a minimum grade of 2,5 g/t, and a sample of 623 g/t has been taken.
JSE-listed DRDGold has been similarly impressed by Zimbabwe's "free-dig" gold opportunity.
DRDGold CEO Ni√É¬´l Pretorius believes Zimbabwe's gold orebodies are too good to ignore, despite the country being politically controversial.
One of the areas DRDGold has been studying is a 550-ha area 45 minutes southeast of Harare.
"I don't think there's another country in Africa where developed infrastructure is so close to gold that's on the surface," Pretorius remarked to Mining Weekly in an interview last year.
Bureaucratic Red Tape?
Moen reports that a popular misconception that society has regarding Zimbabwe is that bureaucratic red tape is the order of the day and that nothing can be achieved without a certain amount of graft.
"In fact, the opposite is true. The industry is not overly regulated and, in the eight years that the company has been active in Zimbabwe, neither Dreyer nor I have been solicited for a bribe. This has never come up in any of the meetings that the company has had with the Ministry of Mines," says Moen.
In 2009, Zimbabwe Finance Minister Tendai Biti described Zimbabwe's political landscape as being in a state of organised chaos and that, through mechanisms set up by the Short-Term Economic Recovery Programme, order would be restored to the country.
Dreyer points out that, although the Zimbabwe Department of Mines and Mineral Development is very primitive by modern international standards, applications and enquiries within the department run smoothly.
"Although a company representative walks into the Department of Mines and Mining Development, in Harare, and physically demarcates its tenement on an old map on a wall, there have been no reported cases of two companies being given the same mineral rights," he says.
He points out that this is not the case in South Africa, where the Department of Mineral Resources is far more technologically advanced than its counterpart in Zimbabwe. "There have been many cases in South Africa where two mining companies have been given the same mining rights by the Department of Mineral Resources," he points out.
South African resources junior Petrex Mining MD Andrew Mari agrees with Dreyer that the investment climate is improving.
"Besides investment in platinum and diamonds, the major development, in terms of new investment in Zimbabwe, has been the announcement of the investment by engineering giant Essar Global into Ziscosteel. It is clear that Zimbabwe comes with a high risk perception, and the lack of clarity on the application of the indigenisation legislation, combined with the slight possibility of elections this year, does nothing to improve this risk perception. Notwithstanding, there are massive opportunities for investors prepared to invest the right amount of time into pursuing and understanding the opportunities available, Essar being a case in point," says Mari.
He adds that, while there is interest across the board, the challenge has been converting this into tangible investment.
"A lot of investors want to get into Zimbabwe without too much exposure to reduce risk."
Mari has formed Petrex to pursue opportunities in chrome and coal, underpinned by offtake agreements with potential investors.
The company's approach now is to start developments on a smaller scale, using own-generated capital, and then bringing in the investors to increase production once they can see something tangible.
Road to Reinvigoration
Zimbabwe mining industry reinvigoration depends a lot on government making firm decisions and taking a hard line on controversial topics.
Investors agree that any revival of the Zimbabwe mining industry will rely heavily on the resolution of the Marange diamond issue as well as clarity about the country's indigenisation requirements.
At the 2010 Zimbabwe Mining Indaba, Zimbabwe Minister of Youth Development, Indigenisation and Empowerment Savior Kasukuwere, who has been an outspoken proponent of indigenisation, warned that the country cannot afford to debate the issue much longer. He also called for government to take a firm stance on the matter.
Further, Mari reports that future Zimbabwe Mining Indabas need to attract serious investors and need to bridge the gap between investment talk and facilitating the inflow of investment capital into the country.