Andre Janse van Vuuren

Zimbabwe needed to ensure consistent supplies of raw materials so that refineries built to process them did not become “white elephants”, the head of the country’s Chamber of Mines said this week.

“There must be output to keep beneficiation facilities running all the time, otherwise we are creating white elephants,” Alex Mhembere, who is also the chief executive of Impala Platinum (Implats) unit Zimplats, said at the Investing in African Mining Indaba in Cape Town on Monday.

Zimbabwe wants the world’s biggest platinum producers to build a refinery to boost the value of its exports and kick-start its economic recovery. Units of companies including Implats and Anglo American Platinum would be compelled to send their ore to the plants, the government said in a letter to producers on January 3.

The country’s output of the metal is 430 000 ounces a year, the document shows.

Zimbabwe’s platinum industry needs as much as $5.3 billion (about R59bn) if it is to expand annual output to more than 500 000 ounces and to construct refineries, according to the platinum producers group. The refineries would process platinum group metals (PGMs) and industrial metals extracted from the same ore bodies.

Achieving the output needed for a platinum refinery was possible, Mhembere said.

Mines Minister Walter Chidakwa said at the Cape Town briefing that Zimbabwe would do what was necessary to ensure the refinery, which will require about 200 megawatts of electricity capacity, went ahead. Coal-bed methane was a power option, he said.

“We can do the same thing for gold, with silver, with platinum, palladium and all the other PGMs,” he said.

China Africa Sunlight Energy said in September last year that it planned to invest up to $2.1bn to develop coal mines and build a 2 100MW plant powered by the fuel in Zimbabwe to help ease electricity shortages.

The company has spent $20 million on exploration, and was granted rights to look for coal and coal-bed methane in the area in October 2012.

A final decision on mining royalty rates would be taken later this year, Chidakwa said. A quarter of these would go to a planned sovereign wealth fund.

The mining and finance ministries “are in full agreement that it is not a good policy to determine our taxes on the basis of fiscal requirements”, Chidakwa said. “It is a good policy to determine our royalties and other taxes on the basis of a desire to broaden the industry.” – Bloomberg