• Sun. May 26th, 2024

Of BNC woes and risks in mining sector

Of BNC woes and risks in mining sector

HARARE – With the development of electric and hybrid cars in the automotive industry for the energy transition, the demand for nickel sulphide is projected to rise steadily in the medium to long term. Zimbabwe has always had a large and diverse mining industry, which unfortunately succumbs to poor mineral resource governance systems. Mines for gold, platinum group metals (PGM), lithium, ferrochrome, diamond and nickel ore combined, have now been largely replaced by Artisanal Small-scale Miners (ASM) primarily focused on a few ounces of gold or a few tonnes of lithium ore just to get by. large miners have become prone to various possibilities of failure to deliver.

Slightly out of the initial context we can also see that the lithium boom in Zimbabwe has also witnessed an unexpected participation of ASM selling the ore to Chinese fortune seekers at extremely low rates until the government intervened by deploying the police to remove illegal lithium miners in many areas like Sandawana Mberengwa, Mutoko and Bikita where the mineral was located. The mining industry’s performance and potential can be influenced by various factors such as commodity prices, operational challenges, regulatory changes, and management decisions. However, each mining company operates in a unique environment with its own set of circumstances.

Bindura Nickel Corporation (BNC) is a mining company located in Zimbabwe’s Mashonaland Central operating mines and a smelter complex in the Bindura area of Zimbabwe. However, the challenges faced by BNC serve as a reminder of the complexities and risks involved in the mining sector, and it’s possible that other major miners could encounter similar struggles under certain conditions. To be able to evaluate the possibility of other major miners struggling in the same way BNC had, it is made easier by looking at the major highlights of the company since its inception to date. The highlights i have managed to pick out in chronological sequence are as follows:

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Some of the negative factors that affected Bindura Nickel Corporation (BNC) include financial challenges and debts, such as the company’s debts escalating to over $31 million in 2004. Job losses without sustainable compensation following the shutdown of BNC in 2008. Significant losses for the parent company, Mwana Africa, due to BNC’s operations in 2013. Conflict and ousting of founder Kalaa Mpinga by ASA in 2015. Share price decline and impact on the Zimbabwe Stock Exchange in 2015. Stalling of the Trojan Mine smelter in the subsequent year due to funding constraints. Financial challenges faced by the company in 2018, with assets worth $28 million and liabilities totalling $32.7 million. Deterioration of major mining equipment in 2023 resulting in declining hoisting capacity.

The mining industry is inherently complex and subject to various challenges such as fluctuating commodity prices, operational issues, regulatory changes, and management decisions. Each mining company operates in a unique environment with its own set of circumstances, so it is possible that other major miners could encounter similar struggles to what we have seen with Bindura Nickel Corporation (BNC) under certain conditions. Factors such as economic conditions, market demand, operational efficiency, leadership and financial management can all contribute to the challenges faced by mining companies. Therefore, while it is not guaranteed, there is a possibility that other major miners could face similar difficulties as BNC if they are not able to effectively navigate and address these challenges.

Does Winston Chitando’s return mean anything for the mining sector?

With the mining sector facing various challenges such as lack of investment, outdated technology, and corruption, the pressure is on for the ministry to deliver tangible results. In terms of subsection 1 of section 104 of the constitution of Zimbabwe, President Emmerson Dambudzo Mnangagwa re-shuffled ministers in three ministries 7 months after their assignment. The questions that arise would require knowing: What specific scandals did Chitando feature tenure as mines minister? What actions did Soda Zhemu take in his short term to achieve the ambitious target of making the mining sector a US$40 billion industry by 2030? Will Winston Chitando’s return to the position of mines minister bring any positive change to the lack of transparency and accountability in the management of Zimbabwe’s mineral resources?

After the Zimbabwe August 2023 harmonized elections, in September 2023, President Mnangagwa appointed Soda Zhemu as the new minister in the Ministry of Mines and Mining Development, replacing Winston Chitando, who had served from 2017 to 2023. Chitando was appointed by the Second Republic that ousted Robert Mugabe in a military action called Operation Restore Legacy in 2017, and his tenure was marked by efforts to revitalize the mining sector and achieve a US$12 billion sector towards vision 2030 of middle class economy by 2030.

Zhemu’s appointment came at a critical juncture, with the country on the brink of determining the sector’s performance and trajectory for the US$ 12 billion mining sector ambition by 2023. With only three months to assess the progress towards the ambitious sector targets, Soda Zhemu faced a daunting task. Sometime in October 2023 soon after his appointment Zhemu set a new target for the country to drive the mining sector into a US$40 billion sector by 2030 with the pretext that the country had managed to acquire a cumulative US$20.5 billion in exports between 2018 and 2023. The mining sector had experienced growth, from 5.9% in 2021 to an estimated 10% in 2022. 

Chitando Scandals

One of Chitando’s scandals during his term as mines minister included a court case under Case number HC 8671/22 when Pulserate alleged that Barrington Resources was a company owned by Chitando contravening section 364 of the Mines and Minerals Act, which states that the Minister cannot directly or indirectly be involved in any mining business. Chitando had attempted to block a company linked to the Moti Group called Pulserate, from mining lithium in an area in Mutoko but the court ruled that the minister was abusing his authority. Chitando was accused of being conflicted in the matter as he was the minister as well as being involved in the company fighting over boundaries. Chitando was also said to be linked to another mining company called Hanzu Resources.

In December 2023, the High Court ordered former Mines and Mining Development Minister Winston Chitando to reverse the forfeiture of several gold mining claims owned by a mining firm called Anesu Gold. Anesu Gold argued that the forfeiture of the gold claims by Chitando during his term as minister of mines was illegal. The minister was cited as the third respondent and some of the accusations traded by the parties tangled the minister in the dispute in his capacity. The lack of transparency and accountability in managing Zimbabwe’s mineral resources has always hampered the sector’s potential growth and development.

The recent changes in leadership within the Ministry of Mines and Mining Development have brought about a wave of speculation and intrigue, as an old controvesial face steps back in to steer the sector towards more ambitious targets. The latest mines minister’s mini-reshuffle draws a lot of skepticism among industry players and stakeholders alike, on what Soda could have done wrong or any criteria used to reassign Winston Chitando. The mining sector, a cornerstone of Zimbabwe’s economy, needed strategic leadership and vision to navigate the challenges and opportunities lying ahead. The sector is facing challenges, including reduced production due to low energy supply, declining global commodity prices of both lithium and platinum and geopolitical tensions reducing demand and cannot afford mismanagement. The consequences of the decline in platinum prices have even been seen with platinum mining companies like Mimosa and ZIMPLATS cutting down on human resources 2 months into 2024.

On April 24, 2024, Winston Chitando made a surprising return to his position as mines minister. Chitando had been temporarily reassigned to the Ministry of Local Government when Soda Zhemu took over the Ministry of Mines. His return to the Ministry of Mines and Mining Development signalled a shift in the leadership dynamics within the sector, raising questions about the future direction and priorities of Zimbabwe’s mining industry. As Zimbabwe looks to attract more foreign investment and boost local production, all eyes are on the Ministry of Mines and Mining Development to see if they can turn the tide. The mining sector has the potential to play a significant role in Zimbabwe’s economic recovery and growth, provided that it is managed transparently and sustainably. Despite the challenges, there is reason to believe that Zimbabwe’s mining sector has a bright future ahead.

What should be done to save the sector from ruin?

The mining sector can be saved from ruin by implementing sustainable mining practices, investing in new technologies to increase efficiency and reduce environmental impact, providing training and support for workers to adapt to changing industry trends and collaborating with local communities to ensure responsible resource extraction. Additionally, governments can create policies that promote responsible mining practices and provide incentives for companies to invest in sustainable development initiatives. By taking these steps, the mining sector can thrive while also protecting the environment and supporting local communities with benefits from mineral resources.

To save the mining sector from ruin in Zimbabwe, several actions can be considered:

  1. Improve Mineral Resource Governance: Implement better governance systems to prevent illegal mining activities and ensure sustainable extraction of resources.
  2. Enhance Regulatory Frameworks: Strengthen regulations to promote responsible mining practices, environmental protection, and fair labor standards.
  3. Increase Investment in Technology: Adopt advanced technologies to improve operational efficiency, reduce costs, and enhance safety measures in mining operations.
  4. Diversify Mining Activities: Encourage diversification of minerals mined to reduce dependency on a single commodity and mitigate risks associated with price fluctuations.
  5. Enhance Skills Development: Invest in training programs to upskill the workforce and ensure a skilled labor pool capable of meeting the sector’s evolving demands.
  6. Foster Public-Private Partnerships: Collaborate with the government, industry stakeholders, and local communities to create a conducive environment for sustainable mining practices and mutual benefits.
  7. Promote Transparency and Accountability: Ensure transparency in financial transactions, environmental impact assessments, and community engagements to build trust and credibility within the sector.

By focusing on these measures, the mining sector in Zimbabwe, including companies like Bindura Nickel Corporation, can overcome challenges, improve performance, and contribute positively to the country’s economy and development agenda 2030 NDS1.

Frank Mpahlo, Executive Director – Green Governance Trust

By ETimes

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