While there are many who see the target of US$12 billion mining output this year as on the ambitious side, being a 50 percent jump on the US$8 billion rough estimate of last year’s output, it is not as outlandish as might be considered.
We have seen large jumps already from the US$2,9 billion in 2017, and a fourfold increase in value of output over five years is possible, driven by the investment policies introduced by the Second Republic, where investors were courted instead of being treated badly, are shown up by what has already happened in the mining sector.
There will be moderate increases in production in several existing major minerals, such as platinum group metals, since the fourth major mine only opens next year, diamonds, chrome and nickel.
Gold will probably do better and there is a good probability, with the expansion of existing mines and the growing sophistication of artisanal miners, of beating the 35 tonne record of 2018 and even reaching 40 tonnes, the figure now being set as a provisional practical target.
Coal will obviously see major production expansion. Zesa is easily the largest consumer of coal in Zimbabwe and the eventual commissioning of the two new 300MW units at Hwange Thermal will more than double Zesa’s coal demand, even taking into account the likelihood that these two large units will be more efficient than the older units.
The doubling or better of Zesa’s demand will not just make a huge difference to coal output, but will also make possible large output increases in the rest of the mining industry. Analysts continually put power constraints near the top of their lists of factors that could limit expansion this year, so Zesa adding 600MW to its generation capacity is important for everyone else in the mining world.
At the same time the commissioning of the first phase of the Manhize steelworks of Dinson Iron and Steel Company will boost demand for coke, and thus for coal, although some of the higher coke demand may come from a diversion of what is now exported, although new supplies will be needed.
The same Manhize steelworks will see a dramatic increase in iron ore production. At the moment only the SteelWorks smelters in Masvingo are mining iron, and this is a modest operation at present although SteelWorks have big expansion plans. But the first phase of those plans is provisionally set for the end of the year, so does not make much difference to the 2023 figures.
But the Disco first phase will make a substantial difference, since commissioning is likely around the middle of the year. Iron ore mining has been very modest since Zisco closed its blast furnaces, but the general investment now being seen will see this mineral output shoot up, and set new records in output, in the near future. And this jump will start this year.
Iron ore is not one of those minerals that Zimbabwe can economically export. It is a fairly low value and high bulk product, and those wanting to import iron ore can find mines, such as those in northwest Australia, that lie very close to the sea and a decent port, so exports are cheap.
But what will probably be the biggest single jump in output will come from lithium, one of the oldest minerals mined in Zimbabwe, but at very low levels for the pre-battery trade. Lithium is needed in ceramics, glassware, some specialised lubricants and in the carbon dioxide scrubbers needed in submarines and spaceships, but demand for these is limited.
What has seen the take-off globally in lithium production has been the lithium batteries, a surprisingly recent technology, and demand here is set to rise dramatically as both the conversion of the motor industries to electric vehicles, and the rapidly rising use of solar power, make large lithium batteries a vital component of modern life. And electric car batteries are big, using anything from 10kg to 25kg of lithium, and switching over from petroleum to electricity in a world with 1,5 billion cars will need a lot of lithium.
Zimbabwe has large reserves of the surface ores, with two new large mines set to come on stream this year, plus the conversion of Bikita Minerals from the small operation it has been for a century to a modern large-scale mine.
In fact the lithium mines are what are likely to be the main driver of the 50 percent rise in value of mining this year, but backed by steel, coal and some gold, and reasonable if not dramatic increases in other minerals.
The rise of lithium and the return of steel to Zimbabwe’s output shows where the strength of Zimbabwe’s mining industry is, and the diversified output makes the industry less liable to the shocks of a single commodity on world markets. We have seen in living memory the closure of a major set of mines, the asbestos mines, following all the health warnings. We could produce this, and asbestos was a big mineral in the colonial days, but right now finding someone who wants to buy it is impossible. This stresses in extreme form the need to have the widest possible range of minerals in the mix. A miner of one can find employment in another, and tax on one can be replaced by tax on another.
Gold demand is largely driven by the desire for bars of gold by investors and others who want their assets in some solid form. There is the demand for jewellery, and gold is also an industrial metal, largely in certain specialised electronic components where a layer a few atoms thick is required in circuits that must be able to resist all forms of corrosion. But the main demand for gold is, as someone once noted, to dig it out of the ground and then bury it back into the ground.
Platinum group metals are largely industrial metals, catalysts in many chemical processes, including the cleaning of pollutants from the exhausts of petroleum powered vehicles. The metals are also used in other industrial applications, are used as jewellery, and are used as a subsidiary store of non-corroding wealth.
But the catalyst consumption is the largest, and over the next decade it will be interesting to see how the rise of the electric car and the eventual ban on new vehicles using internal combustion engines will affect platinum demand. The slack should be taken up by new chemical industries, largely driven by the need for oil companies to switch from producing energy to producing industrial raw materials for the chemicals industry.
Iron and steel, chrome and nickel are largely the base metals used to make things, and demand continues to rise steadily and the most efficient producers are the ones who win through. But we can map consumption in steel in how many consumer goods, from cars onwards, are produced each year and how much global construction is done each year, with steel being a major component of any building larger than a small shack.
Coal is an raw material for the steel industry, is a chemical raw material although petroleum is more favoured when hydro-carbon materials are needed, and in Zimbabwe will be our largest source of electrical energy. Output will be largely dependent on electrical use and steel production in the immediate future.
Although dreamers talk about exporting coal from Botswana, which probably has the largest reserves in Africa, across Zimbabwe to Mozambique and the sea, coal is not an ideal export material over long land distances. It is, like iron ore, a lowish-value high-bulk product that really needs to be mined near the sea. That is one reason why most of Zimbabwe’s coal-orientated exports are in the form of processed coke.
Lithium demand, and so pricing, is driven by electricity storage, and that as noted is rising rapidly. You cannot make things of lithium, a soft highly-reactive metal. So its uses outside batteries are limited. But the battery business is different from other manufacturing, and tends to be continuous rather than having peaks and troughs.
There is a major difference between output, the sort of thing measured in tonnes, and value, measured in US dollars. Rises in prices add more to the value; a fall in prices reduces. But value can also be pushed by processing, and in some case the processing is required before there is any practical value, as we see with iron ore that needs to be converted to steel before we can ship it and sell it.
Here the determination of the Government to boost value by internal processing is so important. Much of the value of a mineral is won by the processor, rather than by the person who digs it out of the ground. Even partial processing inside Zimbabwe makes a large difference to the value of an export. We will see this as lithium moves into the group of top mineral exports, but only if the Government is rigid about banning ore exports, and the miners move rapidly up the processing ladder to producing the pure lithium carbonate and lithium hydroxide that battery makers want.
But the fact that local processing or part processing is now absolutely required is what makes the US$12 billion target possible, so even if actual tonnages only rise 8 percent, and this estimate will be far exceeded by the rising lithium, coal and iron ore output, value can rise much further and faster.