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Chrome Mining Sector in Zimbabwe 2013

part of report

4.4.2 Small-scale Producers

The Committee noted that the majority of the independent small scale chrome producers began operations in 2009 when government opened up a window of opportunity for miners to export chrome. When government closed that facility in 2011, there was a huge outcry from the small-scale producers that they had been deprived of an opportunity to actively participate in the chrome sector. The Committee had an opportunity to analyse the predicament of both government and the small-scale producers and came out with the following observations:

(a) government allowed chrome exports for an 18 month period to enable companies such as Zimalloys to raise finances to re-capitalise its operations. At the same time the agreement between small-scale producers and government was that exports would be permitted on condition that the miners would raise capital to put up smelters hence promote value addition and create more employment in the country.

(b) it emerged during the Committee’s meetings that none of the small-scale or large scaleproducers had any plan to set up a smelter. This was in breach of the agreement. It was clearthat all that the producers wanted was government to extent the period for exports indefinitely.

(c ) while producers had made substantial profits, the country lost a lot of revenue through the export of chrome ore because of the lack of value of addition.

(d) due to the huge profit margins made from exports when compared with selling to the local smelter, there was a rush to mine chrome on the Great Dyke without following proper mining procedures leading to sterilization of mining ground and serious environmental degradation.

(e) it would be very expensive for each small-scale producer to put up a smelter and hence there was need for collective effort by all the small-scale producers to set up joint smelters but unfortunately the miners were not well co-ordinated and this would be difficult to achieve.

(f) government is cognizant of the challenges posed by electricity shortages and the impact it will have on establishing smelters which need to operate on an uninterrupted supply of electricity in order to achieve maximum productivity. At the same time government is also aware that local smelters only have a capacity to consume 53% of the total ore mined due to capacity constraints, leaving out a lot of ore without a market.

(g) the local smelting plants can only process lumpy chrome ore and have inadequate technology to smelt fines and concentrates. At the same time the smelters prefer to buy ore from their own contractors or tributaries. The majority of small scale miners are independent producers and it becomes difficult for them to sell their ore to the local smelters.

(h) for the period 2009 to 2011, government through MMCZ collected a 20% levy from chrome producers totaling US$6,1 million and this was meant to be used for the development of small-scale producers but it ended up with Treasury without achieving its intended purpose. So government was not doing enough to assist the sector.

(I) following the ban, small-scale producers were left with no option but to sell to the local smelters who were offering an average price of US$60 compared to average international prices of between US$110 and US$235 prevailing at that time. In the process, this created a standoff between the small-scale producers and the local smelters.

(j) local smelters only accept an ore grade of 40% and above and yet most small-scale producers own chrome claims with a lower grade content which is not accepted by the smelters but has a market outside the country particularly in Asia.


full report http://nehandaradio.com/2013/07/02/chrome-mining-sector-in-zimbabwe-the-chininga-report/

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Would be interesting to know what is the value for shareholders the TPL board see in this deal.