Economy threatens mining suppliers

The mining sector is reeling from poor economic activity over the past year, with the industry’s suppliers singing the blues as a result of challenges facing other players in the industry.

BY MTHANDAZO NYONI

Exhibitors who attended one of the conferences at the just-ended Mine Entra said things were not rosy in the sector.

Exhibitors urged government to act swiftly to address the challenges or risk losing more than 50% of total exports and approximately 13% of fiscal revenue.

P&R Hydraulics sales manager Phillemon Moyo said business at his company had dropped to 39% in 2015 from 79% in 2013.
The company specialises in hydraulics and supplies companies such as Hwange Colliery.

“Our production has gone down as compared to four years back and things are very bad. Our turnover was high but now it has dropped by almost half,” he said.

Moyo said there was a high rate of companies not paying for the delivered services due to subdued business in the country.

“Our customers are saying the business environment in the country is not conducive due to policy inconsistences.  We are 100% into mining, so when things are not good in the mining sector we get affected,” he said.

Moyo said the future looked bleak and urged the government to do whatever it could to save companies from total collapse.

Listed resources group Falcon Gold raised the red flag in March, indicating that it could close operations because of poor commodity prices.

Gold prices have fallen to the current $1,170 per ounce from the $1,502/oz in 2013 and New Dawn president and chief executive, Ian Saunders told shareholders at Falgold’s annual general meeting in Bulawayo in March that the company could not survive in the current environment.

Global giant Rio Tinto Plc announced the sales of its diamond and coal mining assets in Zimbabwe to Murowa Holdings in June, marking the withdrawal of one of the world’s iconic mining firms from the country after a 60-year presence due to similar challenges.

Coal miner Hwange Colliery’s full year losses increased by nearly 16% to $37 million in the full-year to December 2014 on non-recurring items which cost the company $13 million.

Bindura Nickel Corporation is also not performing up to standard.
Despite being a key driver to the country’s economic revival and contributing 15% of nominal gross domestic product in the country, the sector is hamstrung by limited to inadequate capital and liquidity issues, power deficits, depressed mineral prices, a sub-optimal fiscal landscape, as well as the high cost structures among others.

In his mid-term fiscal review statement, Finance minister Patrick Chinamasa said mining developments during the first half of 2015 indicated a stronger performance to the end of the year, with growth projected above 3,5% against the initial forecast of 3,1%.
He said the upward trend in mineral output during the first half of 2015 was largely on the back of significant increases in gold, nickel, platinum and palladium production.

“The recovery in the gold sector saw output over January-June 2015 rise to 8,8 tonnes, a marked 29,3% improvement from the 6,8 tonnes produced in the similar period of 2014,” he said.

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