Chrome miners write to Mugabe

Chrome miners write to Mugabe
Published: 28 September 2017
ZIMBABWE could lose at least $340 million in potential revenue from ferrochrome exports this year due to a controversial domestic pricing regime, a paper prepared for President Robert Mugabe's office by the Confederation of Zimbabwe Small Scale Chrome Miners (CZSSCM) has revealed.

The paper, titled Government Revenue Generation & Chrome Ore Exports Report for Office of the President and Cabinet (OPC) & Sovereign Wealth Fund of Zimbabwe, is the latest of a flurry of exchanges between authorities and chrome miners, who want the Minerals Marketing Corporation of Zimbabwe (MMCZ) and Applebridge to change the chrome pricing regime.

The country's ferrochrome prices are determined by government through Applebridge, a State-owned, chrome buying agency to which small scale miners sell their chrome.

The MMCZ is responsible for marketing of the metal outside the country.

The MMCZ has maintained prices at a minimum of $80 dollars per tonne, which is far higher than the global price of about $65 per tonne.

This is said to have triggered an exodus of chrome buyers and pushed small scale miners to the brink of collapse.

CZSSCM last month told OPC in its paper that government was losing $2,9 million per month, translating to $35 million by the end of this year, in potential revenue due to the pricing regime.

In the report presented to Mugabe's office, the chrome miners said at current levels of about $80 per tonne, Zimbabwe was expected to produce 284 000 tonnes of the metal this year, earning the industry an estimated $31 million.

However, if MMCZ had allowed the markets to determine prices, Zimbabwean producers would potentially extract and export about 5,2 million tonnes, bolstered by a rise in demand.

This would earn the country an estimated $339,6 million, according to the report.

"Applebridge (and) MMCZ, by continuing to insist on keeping their price at a minimum of $80 and ignoring global market demand for a global market price (currently around $65 per tonne) will cause Zimbabwe chrome ore miners and the industry as a whole to lose a projected revenue of $308,9 million per year," the paper said.

"In addition to these losses, the Zimbabwe government (MMCZ) currently loses a projected monthly revenue from chrome ore sales of $2,9 million. This amounts to $35,6 million per year, all losses based on the fact that MMCZ has chosen to block chrome ore sales via its absurd pricing strategies of setting prices above global market pricing by ignoring distributor middlemen costs," CZSSCM said.

Chrome miners are considered by government to be among sectors supporting economic recovery but are facing problems in the payment of suppliers of critical materials that have reportedly hampered production.

Mining is currently the single largest foreign currency earner in the country.

The miners said recapitalising chrome mines had been difficult in the past year because financiers demanded guarantees of a good market for the metal.

"It should be noted that small scale miners do not have financing options available to them. Unlike gold miners, small scale chrome miners rely on consistent sales in order to capitalise their operations. Heavy mining equipment is also expensive and without consistent large orders, miners are forced to rent equipment on a daily or hourly basis. This type of rental arrangement is the most expensive and raises operational costs to within the $40 to $45 per tonne range. Equipment payment terms that extend past one year will significantly lower costs and eventually enable miners to reach internationally competitive operational mining costs that are below $20 per tonne," the report added.

In a recent interview with The Financial Gazette, an MMCZ executive dismissed the small scale miners' demand.

He said the MMCZ's strategy to maintain chrome prices slightly higher than those obtaining in other markets was meant to protect small scale producers from exploitation by offshore chrome merchants, who were preying on their difficulties to widen margins.

"At the moment, it does not make sense for MMCZ to accept prices from the international markets that are below those being offered by local smelters and more so when the prices are far below production costs," the executive said.
- fingaz
Tags: Chrome, Mugabe,

Comments

Latest News

Latest Published Reports

Latest jobs