Zimbabwe has the world’s third-largest reserves of platinum after Russia and South Africa.
It also mines nickel, chrome, lithium and coal. Mining companies that operate in Zimbabwe include subsidiaries of Impala Platinum Ltd., Anglo American Platinum Ltd and Sibanye Gold Ltd.
The annual earnings of the mining sector have nearly doubled from US$2.7 billion in 2017 to US$5.73 billion in 2021. Projections by the Ministry of Finance show that mining earnings will reach US$7.3 billion by the end of the year, achieving 60.8 per cent of the US$12 billion target for 2023.
- Zimbabwe has set new regulations for local companies, which include a doubling of mineral royalties for platinum miners.
- The royalty rate for platinum miners among them units of Anglo Platinum and Impala Platinum has been raised from 2.5 per cent to 5 per cent.
- Mineral royalties will now be paid “in both local and foreign currency in the ratio of 50:50”.
This growth in mining earnings coupled with recently increased royalty rates for platinum and lithium translates to more government revenue from mining royalties.
The southern African country recently announced reforms of the mining royalty policy regarding precious metals and high-valued minerals – gold, diamonds, platinum group of metals (PGMs), and lithium. Royalties for these four minerals will be paid partly in cash and the final refined product.
This order is a 2020 decision requiring mining companies to pay the tax only in foreign currency.
A mining royalty is a sovereign right to receive payment based on a percentage of the value of the mineral exported. Mining royalties are deducted as a percentage of the gross value of minerals shipped.
Diamonds and other precious stones were taxed at 10 per cent, platinum 2.5 per cent, other precious metals four per cent, base and industrial metals two per cent, coal one per cent, and black granite and other uncut dimensional stones at two per cent.
The government said several reasons have necessitated the new policy shift. The spike in mineral earnings ensures that there is revenue to support public expenditure while mineral reserves are also built to accumulate savings.
Zimbabwe’s President Emmerson Mnangagwa said a new policy that compels miners to pay half of their royalties in goods and half in cash will start from this month as the country attempts to make precious essence and mineral stashes for the first time.
The southern African nation will hold gold, diamonds, platinum and lithium reserves, Mnangagwa said in his daily column, published in the Sunday Mail review.
“Starting this October, Government now requires that part of these royalties come as factual refined mining product in respect of each of the four minerals,” he wrote in the state-owned paper.
He said the central bank will be custodian of the reserves, which will be in reused final products, not ore, indeed if they’re reused abroad.
The Chamber of Mines, which represents major mining companies, said it was not worried about the pronouncement because it would not increase existing royalty rates.
“We respect the government’s position. It’s their prerogative. All they are saying is they are changing payment modalities,” Chamber of Mines Chief Executive Isaac Kwesu told Reuters.
During the third quarter of 2021, the industry registered mixed performances. Gold, diamond, coal and granite recorded strong growth, which drove the quarterly output, while PGMs, chrome and nickel, registered subdued growth
Gold output at 9,380.7 kg in the third quarter of 2021, surpassed the output produced in the same period in 2020 by 107.6 per cent. Output was largely driven by artisanal and small-scale gold miners, who delivered an output that exceeded the comparable period in 2020 by 312.4 per cent and the previous quarter by 87.8 per cent.
According to the central bank, gold production was enhanced by the incentives introduced during the year’s first half. The incentives included a downward revision of royalties from two per cent to one per cent, for Artisanal and Small Gold Miners (ASGM) effected in early 2021, the introduction of a 2.5 per cent to five per cent incentive for ASGM and the formalization of their activities.
Platinum output stood at 3,559 kg in the third quarter of 2021, about three per cent lower than 3,675 kg produced in the same quarter in 2020. Similarly, palladium output at 2,985 kg, was 4.9 per cent lower than 3,138 kg produced in the third quarter of 2020.
The output of PGMs was weighed down by the loss of production time due to planned maintenance of plant and equipment at two of the major producers during the period under review.
According to the Ministry of Mines & Mining Development, diamond output stood at 1,242,711 carats in the third quarter of 2021, representing a 129.5 per cent increase compared to the same period in 2020.
The increase was driven by one of the major mining houses in the industry through increased investments in efficient plant and machinery, which improved recoveries and fostered mine development during the first half of the year.
During the period under review, coal output amounted to 1.15 million tonnes, an increase of 39 per cent over the comparable period in 2020.
Coal production was enhanced by some key players’ increased investments in plant and mining equipment during the first half of the year.
The export window extended to the miners to cater for the low uptake of coal by the power utility also boosted output as mining houses sought to increase foreign currency earnings.
Chrome output at 481,287.7 tonnes in the third quarter of 2021, was 96 per cent more than the output produced in the same period in 2020.
The resumption of smelting activities during the second quarter of 2021, following the easing of Covid-19 restrictions, coupled with the ban imposed on the export of raw chrome, resulted in most of the chrome (67 per cent) being disposed of as High Carbon Ferrochrome (HCF), with 23 per cent being sold as raw chrome, during the period under review.
Cumulative nickel output for the third quarter of 2021 amounted to 4,022.1 tonnes, about 7.9 per cent lower than in the third quarter of 2020.
Nickel output was weighed down by reduced throughput from both primary and secondary producers, which fell by 31 per cent and 8 per cent, respectively, compared to the same period in 2020. Producers failed to take advantage of favourable international prices.