Outlook for listed miners rosy
Listed mining stocks are projected to record strong performances this year as the mining sector sees recovery in production and commodity prices.
The relaxation of Covid-19 restrictions, which negatively affected most economic sectors across the globe, is also expected to boost the mining sector’s recovery.
The pandemic induced disruptions were the main reason for lower mine production globally in 2020, and the impact varied geographically and over time.
Africa and the Americas saw Covid-19 negatively impacting production the hardest in the second quarter of 2020, but economic analysts have projected interruptions to production from the pandemic to diminish, beginning in 2022 and going forward.
In Zimbabwe, apart from their own individual initiatives by mining companies, the Government has embarked on an aggressive drive to grow the mining sector into a US$12 billion industry (revenue) by 2023.
It expects the sector to increase its contribution towards economic turnaround and transformation of Zimbabwe into an upper middle income economy by 2030.
Better out-turn for mining firms in 2022 globally, coupled with initiatives being rolled out by the Government are expected to boost mining stocks on local stock exchanges.
Currently, there are three active mining counters on the Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchange (VFEX).
These are diversified resources groups, RioZim, which is listed on the ZSE, as well as Bindura Nickel Corporation and Caledonia, which trade on the VFEX.
“The mining sector is set to have another good year to CY21 supported by recovering production figures and firm hard commodity prices,” said stockbrokers IH Securities in their Initiating Coverage, Caledonia Mining Corporation Plc report.
Amidst other actions is the introduction of the export initiative scheme addressing incremental retention ratios and exemptions from export surrender requirements.
The Minerals Marketing Corporation of Zimbabwe (MMCZ) has said that export revenues from the country’s mineral resources, excluding gold, could reach US$3,2 billion in 2021, after surpassing the targets set for the year in just eight months.
Caledonia, which is the parent company for Gwanda based gold producer, Blanket Mine, is projected to maintain a growth in earnings supported by strong gold production, while also benefiting from its acquisitions and firm commodity prices.
Projected favourable gold price, expected to stabilise at an average of US$1 600 per ounce over the next 12 months is likely to favour Caledonia’s and RioZim’s earnings in 2022 and going forward.
Annual gold production at Caledonia is forecast to reach 80 000 ounces beginning this year, spurred by maturation of the central main shaft expansion programme, selffunded at a cost of US$67 million.
Caledonia also made investments towards solar energy to boost power supplies at BlanketMine, which should be up and running this year with a target to provide approximately 27 percent of the mine’s total daily electricity demand.
“With no other major CAPEX immediately on the books, higher production and low unit costs overall — this gives Caledonia significant upside in a cash rich position giving room for profit-share growth with investors “Production costs are expected to trend downwards at Blanket Mine due to anticipated economies of scale as the central shaft comes online,” said equities firm IH Securities.
On the other hand, Bindura invested a total US$4,7 million during the half year period to September 30, 2021 in capital expenditure as part of its on-going programme to replace old and obsolete mobile mining equipment.
“This will assist the business to mine and process higher volumes of ore, as distinct from the historical over-mining of high grade massives, which approach is being corrected through the new mining strategy.
“In addition, the rate of development underground has been increased to unlock the higher volumes required going into the future,” said chairman Muchadeyi Masunda.
The group also remains upbeat of meeting full year projections.
“The focus during the remainder of the year will, therefore, be on recovering the nickel in concentrate production deficit and managing costs.
“Nickel in concentrate production for the full year is thus still expected to be about 6 000 tonnes,” he said.
Firm global commodity prices will also be in the group’s favour going forward. The country boasts of other minerals such as platinum, diamonds, nickel and chrome. -The Herald
