Vusumuzi Dube
Rutendo Nyeve, Sunday News Reporter
THE country’s mining industry has been projected to grow by 7.6 percent due to improved power supply and investment in the sector while revenues are expected to fall due to softening commodity prices, an IH Securities report has noted.
The mining sector grew at a slower 4.8 percent last year compared to the 10.5 percent seen in 2022 due to challenges in the sector which included persistent power cuts, and an increase in operating costs on the back of elevated imported inflationary pressures.
According to the report, global oil prices lost 10 percent within the year whilst local diesel pump prices ended the year 3.7 percent higher relative to the same period last year factoring into the cost base. Capacity utilisation for the industry was however up 3 percentage points to 84 percent within the period.
The sector is however expected to register growth due to improved power supply and investments.
“Going into 2024, the industry is expected to grow 7.6 percent off improved power supply and ongoing investments in the sector aiding growth in production. However, the Chamber of Mines expects revenues in the industry to fall by 10 percent in 2024 with profitability coming under pressure as commodity prices soften.
“However gold prices are forecasted to hold ground in 2024 on account of the sustained uncertainty in economic conditions. Price outlook for key minerals Lithium and PGM’s however looks bearish,” reads the report.
According to the report, gold production fell 15 percent y/y in 2023 to 30.11 tonnes, underperforming initial estimates on account of lower production from artisanal miners, electricity deficits and currency volatility. On a global level, despite the metals and minerals index retreating 8 percent y/y, gold prices remained resilient, yielding a 14 percent gain within the year and closing the year at US$2.062.
“Gold exports are however expected to decrease 6.3 percent to US$1.82bn. PGM prices however saw a notable decline in 2023 with receipts expected to fall 37% to US$1.4bn in 2023. The lithium sub-sector has grown exponentially within the year on multiple new investments that have started coming online.
“Production in 2023 is estimated to have grown 761 percent to 881,709 tonnes with recorded export revenues of US$716mn. SI 213 of 2022 also banned the export of unprocessed lithium allowing for the production of lithium carbonate with lithium-producing companies required to submit their beneficiation plans no later than 31 March 2024,” reads the report.
The report also noted that key legislative changes in 2023 affecting the sector which included the standardisation of export retention thresholds to 75 percent, overriding the incremental export initiative for VFEX-listed miners who could keep 100 percent of proceeds on excess production from a pre-set baseline.
From the 2024 budget the Ministry of Finance and Economic Development also introduced capital gains tax and stamp duty as a requirement preceding the transfer, disposal or lease of mineral rights. In cases where mining rights are disposed of privately outside the country at astronomical prices, the revenue derived from there is to be shared equally with the State. A 1 percent levy on gross proceeds of lithium, black granite, and other cut or uncut dimensional stones and quarry stones was also introduced to boost community development.
Online Reporter