‘High royalties to impact minerals output’

Winston Chitando said Government should lessen royalties as they weighed down on net returns.
Addressing the Buy Zimbabwe seminar mining cluster in Harare on Friday, Mr Chitando said any levy on royalties affected the mining plan.
The outcry comes after the Government late last year hiked royalties for gold and platinum to 7 percent from 4,5 percent and 10 percent from 5 percent respectively, starting January this year.
Mr Chitando warned that the higher royalties would compel companies to raise the cut-off threshold of the mineral yield they are prepared to extract.
The Chamber of Mines president said  high royalties could sterilise the resource. He said low yield mineral blocks would not be exploited.
“Any royalty affects the mining plan,” he said. “If in theory your royalty is 5 percent it means you reduce profitability by 5 percent. As you mine you do not extract everything. You choose what is profitable.
“Whether you mine something that is 4,5 grammes per tonne or 0,1g per tonne the cost per volume (mineral ore) is the same,” he said.
The mining companies said they would reluctantly leave more resources in the ground because extracting them would be sub-economic.
Finance Minister Tendai Biti last year doubled mining royalties on concerns that the fiscus was getting little revenue from the mining sector.
Analysts fear the increase in royalties could affect economic growth as mining, together with agriculture, is expected to anchor the growth.
The economy is forecast to grow by a conservative 9,4 percent this year. It grew by 9,3 percent last year, its third consecutive expansion.
The mining sector has increasingly become important to Zimbabwe after contributing about 13 percent to Gross Domestic Product, according to the Ministry of Mines and Mining Development.
Meanwhile, Mines and Mining Development Minister Obert Mpofu said he was working closely with the Ministry of Youth Development, Indigenisation and Empowerment to localise foreign mines.
He warned foreign mining firms that any attempts to avoid the country’s equity laws would only result in serious complexities.
Minister Mpofu said for the country to realise optimal benefits from mining it was critical for Government and locals to have direct control.
“Government seeks to achieve economic empowerment and indigenisation in the mining sector in a manner that results in the development of the industry for long lasting economic benefits,” he said.
The minister also expressed confidence that firming commodity prices would enable the mining sector to anchor economic growth.
Zimbabwe has the world’s second largest deposits of platinum and is said to have capacity to supply 25 percent of global diamond sales. It boasts of at least 40 known mineral occurrences.