Gold prices drive mining sector growth

RESEARCH and stockbroking firm, IH Securities, says favourable gold prices have boosted foreign currency receipts this year, leading to a growth of 9,5 percent from US$5,6 billion in the first half of 2023 to US$6,2 billion in first half of 2024.

In its Equity Strategy Year to Date Review, the stockbroking firm noted that overall mineral exports accounted for 65 percent of export receipts in the first half of this year, signifying the importance of the sector for the economy.

The mining sector is a major contributor to the economy, accounting for 13 percent of the gross domestic product and employing over 50 000.

“Gold deliveries to Fidelity for the first nine months of 2024 were 7,2 percent ahead of the prior year at 24 tonnes. For the remainder of the year, Fidelity estimates it will receive 11 tonnes, bringing the annual total to 35 tonnes,” it said.

IH Securities said elsewhere in the sector, depressed commodity prices have taken their toll as platinum producers have had to implement cost management strategies.

A steady decline in prices of key metals such as lithium and platinum group of metals since early 2022, fuelled by slowing economic activities in China and other advanced economies, is threatening the profitability and viability of local mining projects.

So distressing is the situation that some mining firms, including well-established ones majoring in formerly lucrative metals, rolled out workers retrenchment.

Gold

For instance, IH Securities noted that Kuvimba Mining House recently revealed it was considering budget cuts for its Darwendale Platinum Project.

National platinum production is expected to fall by a marginal one percent in 2024 to 504 000 ounces amid operational challenges and depressed prices.

Lithium operations have also been affected by weak prices, with miners such as Bikita Minerals halting production on one of its plants as a result.

It noted that, according to the Chamber of Mines, miners have spent approximately US$182 million on capital projects in 2024, with an additional US$495 million in the pipeline for 2025.

“Notable investments include a US$30 million expansion project at Blanket Mine, Mimosa’s US$79 million development of a Tailings Storage Facility and US$14m expansion at Pickstone Peerless.

“Whilst capacity utilisation in the sector remains unchanged from 2023 levels at 84 percent, the Chamber of Mines estimates that it will reach 90 percent in 2025 on the back of improvements in gold, ferrochrome and PGMs.”

The report shows that gold capital projects have a financial outlay of $65 million, coal sector players intend to inject $20 million, ferrochrome sector ($25 million), platinum firms ($2,8 million) and lithium sector is expecting to inject US$380million.

However, IH has said power outages are one of the key constraints crippling the sector, with a recent survey by the Chamber of Mines indicating that miners have lost $500 million of potential revenue due to power outages this year.

“In addition, the high electricity tariff, pegged at USc14.21/KWh with a peak tariff of about USc19/KWh continues to exert cost pressures on industry players.

“The cost is even higher during power outages, where diesel powered generators are used as a backup, with an implied tariff exceeding USc30/kwh,” reads part of the report.

It noted that the Mining Business Confidence Index for 2025, which measures the mining business sentiments about the prospects of the industry in the next 12 months, is positive (+5.4 percent), signifying miners’ confidence in their prospects in the outlook owing to anticipated commodity price recovery in 2025.

The latest Mining Industry Prospects for 2025 report findings shows that in 2025, the mining industry’s electricity demand is expected to increase by about 18 percent to 700 megawatts while diesel consumption is expected to increase by 12 percent.

The State of the Mining Industry Survey commissioned by the Chamber of Mines of Zimbabwe (CoMZ), was conceived in 2015 to provide a detailed account of the state of affairs in the mining industry vis-à-vis key performance opportunities, prospects and challenges in the mining sector.

Since its inception, the report has become the main reliable source of the state of affairs on the performance and prospects of the mining industry.

The survey reports have assisted in bridging the information gap and providing leverage for Government policy, as well as strategic planning for other key stakeholders that include mining houses, investors, financiers, suppliers, labour and communities. -chroncile