A new coal mining firm from Russia, Liberation Mining (Pvt) Limited, has obtained an operating licence from Government and immediately rolled out plans to extract 15 million tonnes of coal in the next five years.
This year, Liberation Mining plans to mine between 1,5 million tonnes and 2 million tonnes of coal. The project is worth an estimated US$500 million.
Liberation Mining – in which Sable Mining Africa Limited has acquired a 49 percent stake through its subsidiary, Somedon Investments (Pvt) Ltd – got a special grant to mine in the coal rich Lubimbi area of Matabeleland North province.
Company managing director Mr Victor Tskhovrebov told The Sunday Mail Business that they have since obtained an operating licence and are now waiting for Environmental Management Agency officials at the mine to clear issues pertaining to their Environmental Impact Assessment (EIA) plan in the near future.
“We got our licence on February 23 (but) we can’t talk about the size of the investment at the moment. We are in the stage of exploration for coal. We are investing in Zimbabwe for the first time. This mine in Lubimbi is the first and for now, it’s the only project but we hope there will be more projects,” said Mr Tskhovrebov.
Mr Tskhovrebov is already considering seeking other investment opportunities in the gold, chrome, platinum and nickel sectors.
Liberation Mining came to Zimbabwe in the second quarter of last year. But once its coal project starts, Zimbabwe is poised for increased electricity generation at its thermal power stations. Currently, electricity generation is constrained — particularly at Munyati, Bulawayo and Harare thermal power stations — due to low coal output, among other issues.
Power generation plunged to 764MW on February 23 but rose to 913MW on Thursday last week. Output dramatically fell at Hwange Thermal Power Station from an average of 365MW to 148MW last Thursday reportedly due to water logging, wet coal, the overhauling of Unit 2 and frequent generator outages.
Market watchers say Zimbabwe will require a lot of electricity going forward, so as to feed the manufacturing, agricultural and mining sectors, which are poised to demand more power as investors continue to flock to the country.
Since the new Government came into being, it has been inviting foreign investors to explore opportunities in the country. Recently, President Mnangagwa said firm investment commitments of up to US$3 billion have been recorded in the last few weeks, raising the prospects of an industrial boom should they be followed up. Liberation Mining will bring massive competition to Hwange Colliery Company Limited (HCCL) and Makomo Resources, the two major coal mining companies in the country. HCCL, which started operations in 1890, has been dislodged as the biggest coal miner by Makomo due to operational challenges.
However, it has crafted a recovery plan anchored on a scheme of arrangement approved by creditors in April last year.
Creditors were owed US$352 million and HCCL has started paying some of them, including employees. Apart from the local market, Liberation Mining intends to export the bulk of its coal to South Africa, DRC and Zambia, and is keen to invest in top technology, especially for washing coal. So far, Liberation Mining has employed 160 people but its strategy entails creating more jobs through contract mining. Three firms, including Passmark and CML, have since been engaged. However, some employees will be hired directly.
Boon for NRZ
Indications by Liberation Mining that it plans to export coal would bring spin-offs to the recovering National Railways of Zimbabwe (NRZ). President Mnangagwa recently commissioned 108 wagons, seven locomotives and eight passenger coaches for NRZ. NRZ got a US$400 million revival package from the Diaspora Infrastructure Development Group (DIDG) and Transnet of South Africa. Mr Tskhovrebov wants to work closely with NRZ, given that their operations “badly need rail transportation”.
He said if they can strike an acceptable deal with NRZ, Liberation Mining is open to helping out the rail firm.
“As a big mining company, we can help in reshaping NRZ. But we know how much it costs to move coal and if NRZ can agree with us, we can work with them to refurbish their stations,” said Mr Tskhovrebov.
Liberation’s currency and cost concerns
But Liberation Mining is concerned about the currency issue, high cost of doing business in the country and a regulatory maze. Zimbabwe adopted multiple currencies in 2009 to check runaway inflation, which had seen prices spiralling out of control and almost all goods disappearing from supermarket shelves.
While the move was successful in stabilising the economy, the use of the currency – particularly the US dollar as a reserve and trading currency – is reportedly affecting economic growth. Production costs are high, ultimately making prices of finished goods also very high.
This has impacted on the competitiveness of locally produced goods in foreign markets and companies’ profitability. Mr Tskhovrebov said the currency issue should be addressed to reduce the cost of mining in the country.
“As a sovereign country you need your own currency. The currency issue frightens investors. That is a big, big issue because the cost of mining in Zimbabwe is pretty high,” he said.
Already, a shortage of foreign currency has affected companies’ ability to import raw materials and spare parts. Reserve Bank of Zimbabwe (RBZ) Deputy Governor Dr Kupukile Mlambo told delegates during last week’s two-day mining conference that some firms have not had their foreign payments processed in the last year. Government admits that dollarisation has brought both benefits and challenges, but there is no hurry in abandoning it until a time when the right fundamentals are in place.
Some of the fundamentals include having three months’ cover of foreign currency. This has resulted in a major campaign to encourage local producers to export their goods. Liberation Mining also wants Government to drastically cut the number of laws that directly and indirectly impact on miners’ operations. Said Mr Tskhovrebov: “We hope the regulations will be made easy. For now, there are 16 regulatory bodies, which is too much pressure on commercial enterprises. Many of the regulatory bodies tend to do the same job.
“I also feel that taxes and duty are too high. If Government reduces the taxes, it would be surprised by the revenue it will raise because more and more people will start to pay. But if it’s too high, businesses will avoid paying taxes in order to survive.”
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