FALLING global metal prices are taking a heavy toll on the viability of local mining companies amid fears this could force some of the entities to scale down operations in order to contain rising costs and maintain profitability.
The mining companies have since made an impassioned plea for the Government to intervene to limit the impact of the falling global mineral prices.
They have proposed interventions such as a reduction of some of the taxes and cost of key enablers like electricity.
Mining is a strategically key economic sector for Zimbabwe.
Apart from employing thousands, mining in Zimbabwe accounts for over 12 percent of gross domestic product and generates well over three-quarters of the country’s export earnings.
Zimbabwe has more than 60 extractable minerals but limited investment means less than 10 are currently being commercially exploited. Among these are gold, platinum, diamond, chrome, nickel, coal and lithium.
Over the past 12 months the mining industry across the globe has experienced softening prices for key minerals with the most affected being rhodium -74 percent, lithium -69 percent, diamond -60 and nickel -8 percent.
The World Bank’s metals and minerals price index rose 10 percent in the first quarter of 2023. Price increases at the beginning of the year reflected positive sentiment about stronger demand amid supply disruptions for some key metals.
Metal prices were forecast to fall this year as supply recovers amid weak demand in advanced economies and China. Zimbabwe’s mining companies said operating costs had increased by 10 percent in the past 11 months.
Chamber of Mines of Zimbabwe (CoMZ) chief executive Mr Isaac Kwesu said in an interview the mining companies had been hit hard by the plunging global commodity prices.
Mr Kwesu said there was very little mines could do about the situation given that they are only price takers of global metal prices.
The CoMZ boss said while metal prices were coming down on the international market, costs were heading north, negatively impacting the viability of miners. This, however, jeopardises Zimbabwe’s ambitious target to grow mining to a US$12 billion industry by the end of this year.
Zimbabwe’s foreign currency receipts reached US$5,5 billion in the first-half of 2023 driven by exports and diaspora remittances among other top earners, according to the Reserve Bank of Zimbabwe (RBZ)’s mid-year Monetary Policy Statement (MPS) review.
The Government has designated mining as one of the key anchors expected to drive short to medium-term economic growth.