Government should introduce a cocktail of measures in the mining sector, including establishing a minerals database, to capacitate the industry and unlock its full potential, according to mining expert Honest Tekere.Zimbabwe, Tekere said, should set up a mining exploration company to determine the value of mineral deposits underground before Government issues claims to foreign entities.
Tekere who has been in mining for over 25 years and is Hwange Colliery Acting Mine Captain, says the country has failed to gain sovereignty over its mineral resource exploitation because the foreign companies have always had an upper hand in negotiations due to the fact that Government does not have an appreciation of the exact mineral deposits which lie underground.
“Zimbabwe has failed in gaining real sovereignty over its mineral resource exploitation because the Government is outwitted by foreign companies in negotiating contracts.
The agreements produced have effectively removed Government or its relevant entities from the actual management of joint ventures and from control over exploration,” said Tekere.
He called for the establishment of a mining development bank, mining insurance company, mineral stockpiling company, mineral beneficiation and value addition company, care and maintenance company as well as a rehabilitation company.
Establishment of a Mining Exploration Company (MEC)
Tekere said if established the company will provide detailed bankable mining reports and maps showing traces of all minerals within the confines of the Zimbabwe geological system.
“The rewards of successful exploration and development can be large, if a mineral deposit is discovered, evaluated, and developed into a mine and these mine reports will attract potential investors and are bankable as MEM will guarantor their exploration reports,” he said
Mining Exploration Company (MEC) in brief through the Government of Zimbabwe extend the same ‘‘command agriculture’’ blueprint to mining sector and coining it a bankable ‘‘contractual investment mining’’ with every
possibility of a return on investment in place, given mineral mappings with estimated mineral reserves through pegged concessions from the Ministry of
Mines and Mining Development in Zimbabwe.
The Government through Mining Exploration Company sales mining concessions to investors, the Mining Development provides finances which are insured with the Mining Insurance Company against any possibility of a loss.
The MEC through the bank and insurance sector sets up a mining insurance and rehabilitation fund (MIRF), which finances mining institutions to operate at low capacity utilisation and puts the company under care and maintenance until such a time when there is a bullish trends return to the stock market and then resuscitate the operations and increase capacity utilisation.
Mining Development Bank
The setting up of an institutional development bank tailor made to make provisions of finance requirements in this high capital intensive industry is seen as a noble idea for mining institutions.
A mining development bank will ease heavy reliance on Foreign Direct Investment (FDI) for funding, but rather minerals should be used to build local capital (financial and physical).
The mine development bank will take over the assets and liabilities of the former Zimbabwe Mining Development Corporation (ZMDC) and set up as a vehicle for the promotion of mining exploration, development, growth and marketing thereof and realise profits that will enhance sustainability and improvement of the living standards of Zimbabweans in their various communities.
“The ministry’s allocation has been declining since 2015 and it is also important to note that the allocations have remained lower than those for other non-economic driving Ministries.
‘‘In addition to the allocated amount of $5,395 million, the ministry is also expected to get about $6,935 million from the Mines and Mining Development Fund.
“However, the viability of the fund is heavily affected by the high default rate in the payment of mining fees by mining title holders.
‘‘The Ministry’s budget is skewed towards funding current expenditures at the expense of capital expenditures.
Of the Ministry’s 2017 allocation, 75 percent will go towards employment costs, 16,7 percent for the Ministry’s operations and maintenance whilst 8.3 percent will go towards capital expenditure.
Conventional wisdom requires that capital expenditure be increased in order to unlock new revenue streams and effectively contribute to the GDP while creating employment,” said Tekere
Minerals Stockpiling Investment Company
The metal bank is an approach that can help overcome the shortcomings of other models of metallic mineral resource management.
A metal bank would not just stockpile rare metals, but would actively trade them and manage them to obtain economic profits.
Thus, it helps reduce the risk of supply shocks generated by political or economic factors. Historically, banks have already stockpiled and stored minerals, mainly precious metals such as gold. A bank holding gold reserves is also stockpiling a strategic resource.
In the case of supply interruptions, the bank could release part of its physical reserves to reduce the impact of the shock.
Such a bank would likely face short-term economic losses, owing to missed marketing opportunities in case of a sustained period of oversupply.
However, these losses could be recovered by the release of the stockpiled resources in times of scarcity and – consequentially – high prices.
The idea of the metal bank involves generating a closed circle among the market participants in order to reduce the influence of speculation.
Over time, the bank can accumulate significant stocks of physical resources, usable to dampen extreme price fluctuations from the open market, caused by political or speculative influences. It is a similar model as the one that OPEC is said to practice for crude oil.
In the case of a metal bank, a customer would pay for the materials they obtain from the bank; however, these materials would be seen as “on lease”.
Customers would get a credit to their “metal bank account” when they return the materials to the bank, after the completion of the life cycle of the product.
Over a certain period of time enough metals are aggregated to build up a sufficient stock, and ensure supply and price stability.
Thus, a metal bank would slowly free the industries from the hands of speculators, who usually do not contribute to the value chain.