Positive outlook for Zimbabwe’s mining sector amid challenges – IH Securities

Zimbabwe’s mining sector is poised for continued growth despite facing significant challenges, according to a report by IH Securities.

The report revealed the sector has seen substantial investment in recent years, with optimism for further expansion into 2024.

Over the past three years, Zimbabwe’s mining industry has attracted over US$1,5 billion in investment, with an additional US$456 million in the pipeline.

This influx of capital has bolstered production, setting the stage for robust output in the coming years.

IH Securities notes; “The sector has benefitted from upwards of US$1,5 billion in investment over the last three years, with over US$456 million more in the pipeline.”

Gold producers, in particular, are poised to capitalise on favourable market conditions.

“Gold producers are set to benefit from the prevailing favourable prices,” states IH Securities.

Investment totalling over US$65 million into exploration and capacity upgrades is expected to further boost production in this sector.

Looking ahead, the report highlights potential growth areas in critical minerals such as copper and lithium, crucial for the clean energy transition.

“In the medium-to-long term, critical minerals that are crucial in the clean energy transition, especially copper and lithium, are expected to offer earnings upside,” according to IH Securities.

According to the report, despite these positive developments, the Zimbabwean mining sector faces persistent challenges that could dampen growth prospects.

The report acknowledges that infrastructure insufficiencies and persistent power shortages remain critical obstacles.

These issues not only increase operational costs but also hinder the sector’s ability to expand efficiently.

IH Securities highlights the significant gap between the funding needed for mining projects estimated at US$12 billion and the available onshore liquidity approximately US$3 billion.

This disparity underscores the financial constraints that miners must navigate to sustain growth.

Foreign investment has been deterred by uncertain exchange controls, currency fluctuations, and fiscal policies within Zimbabwe.

“Foreign investors have historically been deterred by the unfavourable and uncertain exchange control, currency and fiscal policies within the country,” notes IH Securities.

While Zimbabwe’s mining sector shows promise with increased investment and production, overcoming financial constraints, infrastructure challenges, and policy uncertainties will be crucial for sustaining long-term growth.

As the Mines and Mineral Act Amendment Bill progresses, hopes remain high that regulatory reforms will enhance investor confidence and foster a more favourable environment for sustainable development in the sector.

According to IH Securities, performance of several miners is currently weighed on by depressed commodity prices, especially in lithium and PGMs.

“The anticipated subdued profitability in 2024 points to reduced retained earnings available for reinvestment. Earnings will likely continue to be supported by favourable gold prices, which may provide a buffer from high operating costs,” they noted.-ebusinessweekly