Mines Minister Winston Chitando

Zimbabwe’s government is banking on a platinum-mining boom
to help revive its collapsing economy. The world’s biggest platinum companies
say it isn’t going to happen.

Since Emmerson Mnangagwa took over as leader of the country
in late 2017, platinum projects valued at more than $8bn have been announced by
Cypriot and Russian investors.

Still, two decades of political and economic instability and
a government with a track record of seizing privately owned assets makes many
in the industry sceptical about the new ventures. “The sort of things being
thrown around are all smoke and mirrors,” said Neal Froneman, chief executive
officer of Sibanye Gold Ltd., the world’s largest platinum producer, which part
owns a mine in Zimbabwe.

“It’s not easy to raise capital for all those projects and
you have a huge amount of regulatory uncertainty.”

In addition to a history of changing ownership rules, miners
are likely to be deterred by Zimbabwe’s failing currency regime that’s caused
hyperinflation, chronic shortages of fuel and power and U.S. sanctions on
government officials and companies. The southern African nation is facing the
first contraction in gross domestic product since 2008.

Insurmountable Hurdles While record prices for sister metal
palladium are buoying the market, the longer-term outlook for platinum remains
uncertain, making it difficult to justify expensive capital investments, said
Nico Muller, CEO of Impala Platinum Holdings Ltd.

The new investors face “insurmountable hurdles,” he said.
Implats, which produces most of its platinum in South Africa, owns the biggest
mine in Zimbabwe and has previously had concessions seized and given to other

Still, Zimbabwe has the world’s third-biggest deposits of
platinumgroup metals after South Africa and Russia and the shallow depth of its
deposits makes mining cheaper and easier. The government has ambitious mining

The country’s mines ministry earlier this month forecast
platinumgroup metals output at 2.79 million ounces in 2024, almost triple the
979,000 ounces currently produced by Implats, Sibanye and Anglo American
Platinum Ltd. Almost half that target production will come from a $4.2bn mine
being built by Cyprus’s Karo Mining Holdings Ltd.

Karo is 26.8% owned by Tharisa Plc, a publicly traded South
African platinum and chrome miner run by the Pouroulis family. Tharisa has the
right to acquire the rest of the Zimbabwe project. A second $4 billion project
is being developed by Great Dyke Investments, a venture between Russia’s Vi
Holding and Zimbabwean investors.

Great Dyke has appointed African Export-Import Bank to raise
$500m to fund the first phase of a mine that will produce 290,000 ounces of
platinum-group metals by 2023. The project, which was until recently part owned
by companies linked to the Zimbabwean military, expects to start construction
on a processing plant in April, said Great Dyke CEO Alex Ivanov.

The venture is also in negotiations with potential equity
partners, he said. The new investors haven’t raised concerns about Zimbabwe’s
risk, said Mazai Moyo, secretary for the ministry of mines.

Still, to ensure a mining renaissance, the government will
need to convince big producers to start spending, said Charles Laurie, head of
country risk at Bath, Englandbased Verisk Maplecroft. That will require
substantial revisions to the nation’s mining code, he said.

“If the Zimbabwe government is serious about attracting
credible, well capitalized, A-list mining investors, it needs to do much more
than give mining regulations a facelift,” Laurie said. “Investors want speed to
capitalise on the very substantial opportunities, but they also need stability
and clarity.”

For the moment, Implats and Sibanye remain to be convinced,
with both diversifying their investments through acquisitions in North America.

“Maybe when the sanctions are lifted, and there is a real
commitment from government in terms of rules of investing there, it might be a
great place to do business,” Froneman said.— Bloomberg

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