Online Reporter
ZIMBABWE, under the Second Republic has made it clear that maximum value must be added to exports of raw materials before they are shipped, processing between mining and export being generally to the level demanded at the factory gates of final buyers or to the same level demanded in international trade.
While the country has been exceptionally open to investment, such investors in the mining sector have known since being granted their first licences that they were expected to add the necessary processing plants individually or jointly so that they could meet this condition.
Taxes were put in place that would be reduced for those who complied, giving an extra economic incentive.
Over the last few years, exemptions were cut back sharply.
Chrome, where ore exports had been allowed to resume at one stage after problems with the existing smelters, was one of the first which saw exports banned, in this case returning the older system.
As the industry rebuilt itself with some serious investment, the export of raw ores was banned again. Now all chrome is exported as billets and ingots of ferrochrome, and, as our steel industry advances, we are likely to see an increasing percentage of production being an ingredient into locally produced stainless steels, for sale on the local market and for really high value exports.
Other minerals were allowed to pass through intermediate stages as they worked towards the final local processing.
Lithium was one of these.
As mining this metal moved from the very small local production of almost a century near Bikita, to becoming a major chunk of the expanded mining sector when demand for lithium — mostly from those producing lithium-ion batteries — exploded this century, the Government put forward a series of deadlines for local processing, first concentrates and now lithium salts.
Lithium is not sold, traded or transported as a metal. Lithium metal is very reactive and will burst into flame in the presence of water or even high humidity.
So world trade is in two salts, lithium carbonate and lithium hydroxide.
Pure salts of one of these compounds, and lithium carbonate is the most common salt they buy in.
The same requirement is wanted by other users in the glass and pharmaceutical industries.
Specialised lubricant makers prefer the hydroxide salt, but still want it pure.
The more responsible lithium miners in Zimbabwe took up the challenge, first concentrating their ores and now with two processing plants finished or almost finished that can produce the required pure lithium salts.
So the Government has moved, and banned not just all raw ore exports of all minerals, but also of lithium concentrates.
Lithium exporters can now move and sell their product as one of the globally traded salts, with the container loads going straight to the factory gates and not needing any foreign processing before the factory owner unpacks the shipment.
When we get investors wanting to make batteries in Zimbabwe, and many will want a base in the African Continental Free Trade Area with Zimbabwe having a lot of advantages, they will want the same salts at their factory gates, not piles of ore from a nearby mine.
While industrial manufacture of final products is obviously the ultimate in value addition, we need to recognise that Zimbabwe is a major producer of some minerals and will always need to export the mineral rather than what is made from it. But at least we will be doing all the initial and intermediate processing locally and exporting the purified final product wanted by a manufacturer somewhere else.
This makes sure that the processing jobs are kept in Zimbabwe, along with the mining jobs, and that the exports will earn far more. A lot of the final price of any mineral at a factory gate or on one of the global metal exchanges is made up of the processing costs.
Importantly these fluctuate in price far less than the raw mineral, since processing is a fixed cost.
Most miners already know that when exporting from a landlocked country near the foot of a continent, transport costs can be high, since ores are classic versions of low-value high-bulk goods.
Processed minerals, ingots, billets or containers of lithium salts are the opposite, high value and low bulk, so transport costs can be slashed as percentage of the final product.
Since the processing in Zimbabwe will be unlikely to be more expensive than in most other countries, and often cheaper, local processing plus reduced transport costs should push up profits, and that is why, after all, an investor came to Zimbabwe in the first place.
