Zimbabwe mining executives confidence nearing rock bottom

Key mining survey findings:

• 60% of respondents said they faced power outages of up to three days per week. Some 90% of mine executives said they continued to suffer power outages despite signing contracts with ZESA for dedicated power. “Almost all respondents indicated that the power outages have resulted in production stoppages and output losses of between 1% and 40%,” the survey says.
• Producers demand lower tariffs and want to be allowed to import their own power
• 60% of mine executives are pessimistic about political and country risk, while just 20% indicated that they are positive about the political environment
• 80% of respondents see 2019 output falling by between 10% and 40%
• 70% of miners do not anticipate a stable mining policy environment for 2020, while 20% were optimistic
• 60% are less confident about their prospects to raise capital in 2020. Just 20% are anticipating access to capital to improve in 2020. A further 20% expect the situation to remain the same next year
• 60% expect the economy to contract in 2020. In contrast, Finance Minister Mthuli Ncube has forecast the economy to recover 4.6% next year, after falling into recession this year.

However, there are some bright spots in the mining survey.

The report says 60% of executives till expect their operations to be profitable in 2020, which is more executives than was the case in the last survey. Some 60% of the respondents expect marginal growth of the mining sector in 2020. Of the respondents, 80% expect to inject fresh capital into their business in 2020, while 70% expect commodity prices to firm next year.

However, the good news does not offset the pessimism, which dominates the report. Gold miners expect a fall in output of up to 35%, platinum producers see output falling by up to 7%, diamond output will drop this year by between 30% and 40%), chrome (-10% to -20%), nickel (-2% to -10%) and coal (-10% to -40%).

Miners, however, anticipate a rebound in 2020, with gold likely to recover by as much as 40%, chrome by 20%, diamond by between 10% and 20% and coal by up to 15%. The forecasts on recovery are based on plans by mines to ramp up production.

Gold accounts for 43% of the country’s total mineral exports, according to the survey.

Skills flight also hit mines this year, with 60% of miners saying they lost critical skills during the year due to inflation and regulations barring miners from paying locals in foreign currency.

Average capacity utilisation for the mining industry fell to around 70% in 2019, compared to 75% in 2018. Only platinum producers were able to sustain high capacity utilisation, which was close to 100%.

“Executives of mining companies operating below full capacity mentioned acute power outages, inadequate foreign exchange allocations, capital shortages, high cost structure and obsolete equipment as the major constrains weighing down capacity utilisation in the mining industry,” the survey says.-NewZwire

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