BY CLIFF CHIDUKU
WITH its economy tanking, Zimbabwe is looking to mining for salvation.
But platinum ore exports may be leaking millions of dollars in potential revenue the country needs to plug an acute shortage of foreign currency, fuel and drugs, according to local mining experts.
While accurate data is not readily available, the experts say Zimbabwe has not enjoyed the full benefit of its natural resources in part because exports are paid for without including the valuation of several other mineral elements in the platinum group of metals (PGM). Other problems include misreporting of the quantity of exports and the absence of smelters in Zimbabwe to process platinum locally.
However, the platinum producers deny illicit leakages and say they are abiding by all export regulations.
PGM contains ruthenium, rhodium, palladium, osmium, iridium and platinum. These elements tend to occur together in the same mineral deposits. Platinum is one of the top three foreign currency earners for Zimbabwe alongside gold and tobacco.
Norman Mukwakwami, an independent mineral economist, however, notes that with loopholes in platinum mining, Zimbabwe’s ambitions to raise annual mining earnings to US$12 billion by 2023 from the current US$2,9 billion appear unattainable. Zimbabwe has three PGM producers, Zimplats, Mimosa and Unki. A fourth entry, Karo Resources, which broke ground in August 2018, is eyeing to produce at least 1,4 million ounces of PGM by 2023 and has set up a base metals refinery. The Chamber of Mines said Karo Resources was still at the exploration stage.
Mukwakwami said PGM producers were capitalising on leakages in the sector, ranging from weighbridge problems to lack of smelting plants.
“It’s not realistic to achieve that feat when PGM producers are under-declaring exports,” he said.
Mukwakwami has carried out research work for civic society organisations on several issues that affect the extractive industry, including government policy, mining law, illicit financial flows and conflicts between industry and communities.
“In the past, the companies were simply not declaring the minerals that government did not know about. Since PGM deposits contain several elements, they are not individually refined in Zimbabwe as producers export semi-processed ore, matte, which still contains all minerals.
“Statistics show that of the PGMs, only exports of platinum and palladium were declared between 1990 and 1996 with rhodium being reported beginning in 1997. Exports of ruthenium and iridium were only reported beginning in 2002,” Mukwakwami said.
“Analysis of the data shows a near consistency in the amounts of each of the PGMs contained in the ore: 50% platinum, 40% palladium, 5% rhodium, 3% ruthenium and 2% iridium. It can thus be estimated that from 1990 to 1996, 17kg of rhodium was not declared in exports, while between 1990 and 2001, 342kg of ruthenium and 161kg of iridium was not declared in exports.
At today’s prices, this is $1,2 million worth of rhodium, $2,7m worth of ruthenium and $6,9m worth of iridium. This amounts to a total of $10,8m worth of PGMs that leaked out of the country over a decade.”
At the moment, Zimbabwe does not have a platinum refinery plant, therefore, PGM producers export ore concentrates.
However, Zimbabwe’s biggest PGM producer, Zimplats, is a subsidiary of the South African Implats and its exports are to its parent company, thus Implats is benefiting from the other minerals after refining them, but will not pay anything to Zimbabwe.
Since PGMs are exported in raw form, Mukwakwami says it is hard to quantify the actual prejudice.
“While it is difficult to quantify trade misinvoicing in the sector, it is clear that there are weaknesses in regulating exports; that can easily be exploited by companies. One weakness is that the average truckload of matte for export from PGM companies undergoes no independent verification of its weight or composition by government officials,” he said.
“It is MMCZ (Mineral Marketing Corporation of Zimbabwe)’s responsibilty to verify these figures and their approach is to station officials at the mine’s laboratory where tests (assays) are carried out and that same official also observes the weighing of trucks at the weigh bridge. This creates loopholes as officials can be bribed, or the loading equipment and weigh bridge can be calibrated to falsify results.”
Mukwakwami said osmium provided a gap that PGM producers have been exploiting.
“Another issue is that of osmium. This is PGM contained in the exports which companies claim they have no market for and thus do not pay any royalty or tax on.”
He said the market price of osmium (US$400 per troy ounce) has not changed in recent years owing to poor demand, few uses and challenges it poses in terms of storage because of its toxic nature when it oxidises.
Mukai Mangezi, a consulting geologist with MuGre Global Mineral Exploration, said: “The best way of getting value of its mineral, especially platinum, is that Zimbabwe needs a policy shift and embrace beneficiation. It is practically difficult to account for all PGM elements when exporting ore.”
Mines deputy minister Polite Kambamura concedes that Zimbabwe is losing out from ore exports, and is pushing mining companies to beneficiate their produce.
“It is a fact that we are losing value in exporting concentrates. This is the reason why government had proposed a 15% tax on exportation of unbeneficiated platinum. This was a way of pushing companies to add value to PGM locally, thereby making sure all PGM elements are accounted for,” he said.
“We are alive to the fact that there could be ‘other’ base metals, but if we process it locally we are certain to get value. The beneficiation thrust is in line with achieving US$12 billion earnings annually by 2023.”
But MMCZ said although Zimbabwe has no PGM refineries, all ores are processed in South Africa and all elements are recovered and accounted for.
“MMCZ can confirm that refineries in South Africa are not recovering osmium from Zimplats material. To curb any leakages, MMCZ has stationed metallurgists at all PGM mines to monitor and verify production, exports and sales declarations. The monitors check the accuracy of any figures to be declared and used for invoicing by the producers,” MMCZ general manager Tongai Muzenda said.
Platinum Producers Committee chairperson Alex Mhembere, who is also Zimplats chief executive, dismissed allegations that PGM producers are under-declaring some elements in platinum ore.
“The three platinum producers in the country (Zimplats, Mimosa and Unki) are reputable organisations with linkages to leading PGM producers in the world. And contrary to the assertion, for several years now the MMCZ has permanent officers deployed at each PGM producers’ premises. These officers monitor the entire production process up to the final export invoices that are in fact issued under the MMCZ banner.
“All three platinum producers follow elaborate and internationally-accredited metal accounting systems. The systems are anchored on sub-systems of sampling, measurements and assaying by internationally-accredited laboratories through the entire value chain, including drilling and blasting, crashing and milling, flotation processes and smelting. We stand tall and very proud of the work and controls we have in place,” he said.
A 2018 Chamber of Mines report says Zimbabwe’s platinum output increased by 3% to 14,6 tonnes in 2018 from 14,3 tonnes in 2017. The country’s three platinum producers continued to operate at full capacity despite depressed platinum prices, and output was projected at 15,5 tonnes in 2019.
In a drive to attract investors, the government last year scrapped the indigenisation policy; regarded as an impediment to investment, as it prescribed that 51% shareholding of any foreign investment should be ceded to locals. The extractive sector, particularly platinum mining, has been the main centre of attraction to investors.
While it is difficult to quantify how much Zimbabwe loses through illicit financial flows (IFFs), a study by the African Forum and Network on Debt and Development reveals that between 2009 and 2013, the country lost US$2,83 billion through illicit flows in the mining, wildlife and fisheries sectors, translating to an annual average of US$570,75m.
IFFs are illegal movements of money or capital from one country to another with Global Financial Integrity classifying it as a movement when funds are illegally earned, transferred or utilised across country borders.
This story was written for NewsDay as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation. More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher.
