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Zimbabwe’s Platinum Refinery

Plans to build a platinum refinery in Zimbabwe have been boosted after mining companies met the deadline for submission of construction and development proposals set by the Zimbabwean government. The government had told the country’s three platinum producers – Zimplats, Mimosa and Unki – to submit plans for a major refinery plant in order to reduce the amount of raw material exported and boost domestic production. President Robert Mugabe’s government had gone as far as to threaten to ban exports of raw platinum to South Africa if the refinery isn’t built within two years. This threat appears to have worked and the Ministry of Mines and Mining Development is currently evaluating the submitted plans.

Zimbabwe Platinum Refinery plan on track

South Africa currently produces some 80% of world platinum. In 2012, Zimbabwe produced 350,000 ounces of refined platinum, around 6% of world production. Zimbabwe has the world’s second largest platinum reserves after South Africa. As such, Zimbabwe seeks to benefit from the opportunity presented by the strong platinum sector as a means of boosting income to the economically troubled country. Aside from the platinum refinery, media reports suggest that Zimbabwe also plans to develop a coal methane project as well as a precious mineral development centre. The platinum refinery is however a critical part of the Zimbabwean government’s economic rejuvenation plan as well as fitting into the broader political goals of the government in terms of increasing domestic benefits of Zimbabwe’s mineral extraction sector.

The refinery, which will include a 600-megawatt power plant, has an estimated cost of approximately $3.2 billion to build. The development, and the future operation of the refinery face several challenges in terms of the supporting infrastructure, and ensuring a sufficient supply of raw materials to maintain profitability.

Requirements for profitability

Zimbabwe’s platinum sector currently produces 430,000 ounces of annual metal output, closing in on the 500,000 ounces considered necessary to maintain profitability for a refinery. Without meeting a certain quota of processed output, the refinery, which has high inherent operational costs, would be unable to turn a profit. Ensuring consistent supplies of raw material is therefore a major concern for the country’s Chamber of Mines. “There must be output to keep beneficiation facilities running all the time, otherwise we are creating white elephants,” noted Alex Mhembere, the chief executive of Impala Platinum (Implats) unit Zimplats. Mhembere made these comments at the 2014 ‘Investing in African Mining Indaba’ held in Cape Town on 3 and 4 February 2014.

Substantial efforts are required to meet this requirement. Zimbabwe’s platinum industry needs significant investment in order to expand its annual output to the necessary levels. Companies like Implats and Anglo American Platinum (who operate Unki) would be compelled to send their ore to the plants, the government has said. These strong handed tactics are indicative of the Zimbabwean government’s continued drive to assert control over international resource extraction companies operating in Zimbabwe. So far however, these tactics have not dissuaded these companies from continued cooperation with the Zimbabwean government.

Political and infrastructural considerations

Ensuring sufficient infrastructural support for the refinery is also a major planning consideration. Currently, the Zimbabwean national power authority is unable to meet the potential demands of the planned refinery. At the ‘Investing in African Mining Indaba’, Zimbabwean Mines Minister Walter Chidakwa said 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 has been considered as a potential source of power. China Africa Sunlight Energy said in September last year that it planned to invest up to $2.1 billion to develop coal mines and build a 2100MW plant powered by the fuel in Zimbabwe to help ease electricity shortages. The company has already spent $20 million on exploration, and was granted rights to look for coal and coal-bed methane in the area in October 2012.

Zimbabwe also appears willing to let foreign-owned platinum mining firms own majority shares in their local operations if they build a refinery in the country. This appears to be a step away from business reforms previously enacted by President Mugabe. Both Anglo American Platinum and Impala Platinum Holdings have previously been forced to agree to sell 51 percent of shares in their local units to black investors. Mines Minister Chidhakwa has recently said that “the government is simply saying that the guiding principle is 51/49 percent but if the investment does something to this country that can convince us to graduate or move away from the 51/49 percent, we will do so.” It is worth noting however that Chidhakwa’s comments are contradicted by the Youth Economic and Empowerment Minister Francis Nhema, who has told media that Zimbabwe was not softening its empowerment drive against foreign-owned mines, but rather with banks willing to lend more to the country.

The challenges facing the operation of this refinery remain significant, both in terms of expanding raw material production and in ensuring infrastructural support. Nevertheless, it is apparent that Zimbabwe’s platinum refinement ambitions are on track, and the construction of a refinery should occur in the near future. Failure here could dramatically undermine both economic recovery plans and the political stance of the government in terms of asserting control over international resource extraction companies.

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David Okwara

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