daniel chigunwe
Oliver Kazunga
THE high cost of electricity that shot up by over 40 percent in the past 11 months is scuttling the viability of the emerging local lithium industry with some projects struggling to come on stream.
The Chamber of Mines of Zimbabwe (CoMZ) chief executive officer, Isaac Kwesu, said this in response to written questions by this publication.
He said compounded by the upward review in royalty for lithium and falling commodity prices on the international market, the fledgling local lithium industry’s potential is struggling to realise full potential.
“The prices are coming down at a time the cost structure for lithium producers has increased on the back of an upward review in royalty for lithium from 2 percent to 5 percent as well as high electricity charges which went up by more than 40 percent in the last 11 months.
“Most lithium projects are new and facing high establishment costs. The above challenges have severely weighed down on the viability of lithium projects with some now struggling to take off,” said Kwesu.
The price of the base metal has tumbled down by 45 percent between March and September this year to settle at US$16 500 per tonne on the international commodities market.
This spiralling downward trend further confirms a similar trajectory that was recorded between December last year to the end of March this year where the price of lithium fell by 60 percent to settle at US$30 000 per tonne.
The decrease in lithium price on the world market has largely been due to the slowdown in EV (Electric Vehicle) sales growth in China and weaknesses in demand outlook.
“The unfolding softening of commodity prices specifically for lithium have had far reaching viability challenges for lithium producers,” he said.
The government hopes that the increased royalty rate will encourage lithium miners to invest in Zimbabwe and help to develop the country’s lithium sector.
Kwesu said information gathered from lithium producers by CoMZ indicate that they would require supportive interventions specifically royalty and electricity tariff reprieve to restore viability of lithium projects.
“While lithium producers have tried to reduce their costs through various strategies including cutting back on capital expenditure and optimising their businesses, the viability gap is so huge that only with Government intervention in the form of electricity tariff and royalty reduction that viability can be restored,” he said.
“We are certainly going to see some operations being scaled down as the companies will not just fail to pay but will also become unviable.”
ZESA Holdings through one of its subsidiaries, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) has applied to the Zimbabwe Energy Regulatory Authority (ZERA) seeking a US2 cents kWh tariff review for 2023 as it intends to channel revenue generated towards a number of projects geared at improving energy capacity in line with increasing power demand.
Presently, Zimbabwe’s lithium mines are Sandawana Mines, a subsidiary of Kuvimba Mining House, the country’s biggest mining group, the Zulu Lithium and Tantalum project, the Sabi Star Lithium Mine and Bikita Lithium Mine as well as Prospect Lithium Zimbabwe’s project in Goromonzi.
Other lithium mines are also expected to come on board elsewhere in the country, for example, in Mapinga where a US$13 billion mine-to-energy industrial park is being developed in Mashonaland West Province.
Zimbabwe has the world’s fifth-largest lithium reserves, and the government is eager to develop the sector to attract investment and boost the economy.
Lithium is a key component of electric vehicle batteries, and demand for lithium is expected to grow significantly in the coming years.
Bongani Ndlovu