Platinum refinery now a matter of urgency

Golden Sibanda Senior Business Reporter
THE latest report by UK-based platinum refiner Johnson and Matthey projecting an increase in platinum supplies probably amplifies the calls for the establishment of a platinum refinery for beneficiation of the precious metal in Zimbabwe.
There is a strong feeling in most Government quarters that Zimbabwe is losing substantial amounts of potential revenue by exporting raw or semi-processed metal.

There is no doubt in everyone’s mind that setting up a refinery in Zimbabwe to give platinum more value would have massive direct and indirect benefits through increased export inflows, new jobs and downstream linkages.

It becomes justifiably worrisome when reports indicate that the very resource the country has in limitless abundance is actually in short supply on the international market yet the country is unable to maximise returns from the mineral.

Talk about establishment of a platinum refinery in Zimbabwe has been on the table for a long time, but very little in terms of practical action has happened since.

While miners have unequivocally expressed willingness to set up a local refinery the process is painstakingly slow, raising aspersions on the operators and their foreign shareholders’ sincerity and commitment to implementing the initiative.

Concerns and frustration also kick in where authorities realise industry remains largely intransigent about the need for value addition to the country’s extractive resource yet mining has been declared the pivot of economic growth. Consequently, President Mugabe said Government will ban raw platinum exports because former Mines and Mining Development Minister Dr Obert Mpofu gave miners a two-year ultimatum to set up a refinery, but nothing has materialised.

“Let us close our doors immediately and say no raw platinum will go to South Africa. The former minister gave them two years and we must see them now arranging to build a refinery.

“If they have not started building a refinery after that warning, then when the time comes for us to demand that all refining has to be done here they should not blame us.”

Government has no option but to be aggressive and arm twist seemingly reluctant producers to pool resources and set up refinery in the country as it seems industry players are simply buying time.

It is such an aggressive stance from Government that miners should avoid by doing the most ideal and economically sensible things to ensure the country benefits sufficiently from exploitation of its abundant finite resources sooner rather than later.

The establishment of a platinum refinery has become even more urgent considering that mining is expected to anchor economic growth during the five-year tenure of the Zimbabwe Agenda for Sustainable Socio-Economic Transformation – Government’s new macro-economic blueprint for the period 2014-2018.

Prices of platinum on global markets peaked in 2012, but lost steam this year. Despite a marked drop in prices this year demand has remained relatively high with the supply deficit projected to increase this year to 605 000 ounces from 340 000 ounces.

Surely, considering the abundance of the resource in Zimbabwe and the negative effect of prices on potential revenue, refining the metal locally would compensate for the loss in value on global markets when value addition is done locally.

While it will take a substantial amount of money estimated at US$2 billion to build a platinum refinery in Zimbabwe, the long- term benefits to the country will certainly outweigh the cost and pain incurred in setting up the long overdue facility.

While there is need to build critical mass first before setting up a refinery, it is indisputable that the groundwork and plan for raising requisite funding should be in place including completion timelines as producers ramp up production and new projects kick in.

Why is Zimbabwe not able to get its fair share of returns from partaking in global trade in platinum considering the abundance of the resource, which has seen the country being ranked as the second country with the world’s biggest reserve of platinum?

Zimbabwe is this year expected to produce 400 000 ounces of the precious metal, 18 percent up from a year earlier, the Johnson Matthey 2013 platinum report says.

Production is taking place at Zimplats, Mimosa Mining Company and Unki. Thanks to Zimplats current expansion programme which will add 90 000 ounces, Zimplats will thus raise its annual supply to the global platinum market to 270 000 ounces when its expansion programme is done. Mimosa is doing expansion feasibility.

Global supply statistics point to the need to invest substantially in two main areas of the domestic platinum industry, namely the refinery and production ramp up.

While the latter has been happening gradually though constrained by capital limitations, it is in beneficiation where industry players need to devise measures to swiftly address the issue of a local refinery currently done in South Africa.

It means over the years since platinum was first mined at Wedza in 1969 followed by Mimosa Mining Company’s small-scale project in 1994 before a larger scale operation was developed by the BHP/Delta Gold Hartley Platinum Project, the country has lost significant potential revenue and many jobs.

The demand for platinum, used in the manufacture of catalytic converters and medical equipment will rise in the future despite easing on reduced appetite from Chinese jewellery makers.

Demand is projected to continue firming in Europe – where diesel truck makers have to meet Euro VI limits – North America and India.
Considering investors natural tendencies to abruptly pull out and leave unsightly tracts of combed and devoured earth surfaces when ore depletes or mining becomes no longer viable the country should seek to benefit from its resources sooner and invest in development of alternative industries for the future.