The Sunday Mail
Livingstone Marufu
DESPITE an increase in mineral output in the first three months of the year, mineral revenues declined by $15 million to $420 million from $435 million in the same period a year ago as the global rout in commodity prices continued.
Gold and platinum revenues, however, bucked the downtrend.
Overall, mineral earnings are forecasted to decline to $1,8 billion this year from $1,85 billion in 2015.
In the review period, revenues generated from gold and platinum rose to $297 million compared to $263 million realised in the first quarter of 2015.
The contribution of other minerals, as a result, narrowed to $121 million this year from $171 million a year ago.
Notwithstanding the price-induced decline in earnings, mineral production is set to rise 1,6 percent on improved output across all mineral groups by year end. Chrome and coal were the only major minerals whose output declined.
Chamber of Mines of Zimbabwe chief executive officer, Mr Isaac Kwesu told The Sunday Mail Business that while there was an improvement in output, weak prices caused by subdued global demand are still the biggest obstacle to growth.
“The mining industry recorded a robust performance in the first quarter of 2016 compared to the same period in 2015, with the majority of minerals recording stellar output growth.
“Apart from chrome and coal, all major minerals recorded increases in volumes produced ranging from 8 percent to 64 percent.
“Despite the robust performance in the volumes of minerals produced and on the backdrop of depressed prices, the total at mine value for the minerals produced decline 3,5 percent to US$419,96 million in the first quarter of 2016 compared to US$434,96 million in the same period in 2015.
“Outside gold, platinum and iridium, all minerals recorded declines in value in the first quarter of 2016 compared to the same period last year,” said Mr Kwesu.
Gold output increased buoyed by deliveries from small-scale producers under the Gold Mobilisation Programme. Output of the yellow metal is forecasted to top 24,2 tonnes this year from 20 tonnes last year.
Small-scale gold producers currently account for 10 percent of the mineral’s total output. First quarter copper production also jumped 22 percent to 2,5 tonnes from 2,1 tonnes in 2015, but revenues plummeted to $8,5 million from $9 million a year earlier.
Nickel output rose to 4,9 tonnes from 4,4 tonnes last year, while revenues also declined 31 percent to $31 million from $45 million earned in the same period in 2015.
Explained Mr Kwesu: “With the exception of gold, all precious metals were trading below the levels recorded in the first quarter of 2015.
“The average gold prices for January at US$1097,38 per ounce were 12,3 percent lower than that of the corresponding period of 2015.
“However, by March 2016 the average gold price was 5,7 percent higher than the same period of 2015.
“The higher gold price is a positive development for the Zimbabwean gold sector. However, sustained higher prices are needed to place the gold sector on a sound footing given the need to recapitalise and grow the sector,” he said.
Experts say the mining sector will remain depressed in both 2016 and 2017.
An estimated $3,8 billion is required to optimise operations over the next five years. About $1,2 billion is required for “stay-in-business” costs; while $2,6 billion is for expansion projects.
Local gold producers are favoured by the low-cost nature of mining in Zimbabwe, where deposits are generally closer to the surface than other producers in the region.
