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Exploration will turn Zimbabwe into Jewel of Africa

Zimbabwe is the richest country on earth with respect to untapped natural resources per person. The mineral exploration of a nation with the world’s largest diamond reserves, second largest platinum reserves and over 40 exploitable minerals has the potential to turn Zimbabwe into the jewel of Africa.

Mineral exploration is the process by which companies or organisations seek to discover commercially feasible concentrations of mineral resources. Exploration covers activities from the preliminary collection of existing geological data to drilling and sample assays.

The information concerning the nation’s mineral wealth that can be obtained by exploration will simultaneously attract foreign investment as well as strengthen the value of mines and claims already in indigenous hands. This shall set the necessary preconditions for egalitarian and indigenously driven growth in the mining industry.

In order to illustrate how exploration can be an explosive catalyst for growth, one must, firstly, highlight the importance of exploration to both the local community and the nation at large. Secondly, a fund for exploration purposes must be established and can be capitalised by large foreign mining companies as an empowerment credit, permitting companies not to cede a portion  of the 51% local shareholding requirement. The Exploration Fund would explore the millions of hectares held by small and medium scale miners in order to boost the value of the claims and in turn increase small miners’ wealth. Finally, exploration may be the key to attracting the estimated five billion within the next five years in foreign investment required to restore Zimbabwe’s mining industry to its former glory.

As Zimbabwe slowly depletes its major existing mines, discovery of new mines becomes increasingly important to meet ever growing global demand for natural resources.

For a local community or a nation, successful mineral exploration and development can lead to numerous opportunities. Some of these opportunities include new jobs—often well paying—which otherwise would not exist; new infrastructure, such as roads and electric power supplies, which are catalysts for broader, regional economic development; and increased government revenues that, in turn, can be invested in social priorities such as health care, education and poverty alleviation.

Exploration is not only important on personal, business, local and national levels, but also is crucial for Zimbabwe’s international economic and geopolitical strength. Put simply, knowing the value of what lies beneath this nation’s feet increases the nation’s worth; increasing its worth subsequently increases its wealth and power.

The impending creation of a State Exploration Company is an appreciation of this realpolitik and is certainly a step in the right direction that will estimate mineral reserves on a national level. However, funds must also be made available to small miners to explore their claims at a local level.

An Exploration Fund for small miners can be established by allowing foreign mining firms to pour money into the Exploration Fund and therefore be permitted to cede slightly less than 51% to locals. Lowering the indigenisation threshold, as suggested by the sectoral committee on mining, will simultaneously allow for money to flow into the Exploration Fund’s coffers and also encourage foreign investment.

The importance of an Exploration Fund can be underscored by the fact that firstly, it is estimated that approximately a few hundred thousand people work and live in small-scale mining communities all over Zimbabwe.

Secondly, too few of those miners appreciate the value of exploration, and of the few that do, not many have the capacity to explore, and yet exploration is the most important part of the mining cycle.

Currently, there are many local, small-scale mine owners who are oblivious to the true value of their mines due to a lack of exploration. As a result, they are happy to sell their properties for a few thousand dollars to shrewd foreign investors who sign the deal with stone cold faces, only to celebrate once the unsuspecting local has left the room. The reason for such underhanded celebration is that the investors know full well that the claims are likely to reveal millions of dollars worth of mineral reserves.

In the land of the blind, the one-eyed man is king, and those empowered with an appreciation of the value of exploration and the capacity to carry it out can clearly see the value of their mine or claim rise.

Finally, all mining investment professionals, large-scale miners, and mining academics will testify to the fact that no activity adds more value to mining than exploration. The reason for this is simple: the value of information proving that you own x amount of mineral reserves beneath your feet far exceeds the value one can ever hope to unlock by seeking to extract that resource.

Thus, if small-scale miners can use their claims as collateral to draw upon the Exploration Fund, they can conduct stage one exploration involving relatively inexpensive surveying, trenching and sampling, thereby empowering them with inferred reserves estimates for their claims.

These estimates greatly empower miners by now allowing them to either sell their claims to foreign investors at a much higher and more accurate price, or take out mining development loans on the back of their reserves. Alternatively, miners can now enter into joint ventures with investors from a more powerful, informed position. The process of exploration also indicates the best area to begin mining on a claim, thus dramatically increasing mining productivity.

Exploration by the State Exploration Company and by small miners through the Exploration Fund benefits not only Zimbabwe at a national and local level, but also the information obtained serves to render Zimbabwe a more attractive destination for foreign investment.

Internationally, mining companies are finding it increasingly difficult to extract precious metals from the earth. The discoveries of large, multi-million ounce deposits are also decreasing, and foreign miners must look to regions that tend to be geographically challenging and geopolitically hostile.

Given these factors that are pushing foreign investors from their homelands and given the buoyant prevailing mineral prices that are inducing these investors to increase spending on mining, Zimbabwe should ensure that it rolls out the red carpet and creates a conducive  investment climate for this potential capital.

However, Zimbabwe’s sluggishness on the exploration front does not allow it to play a particularly welcoming host to this capital. In fact, the nation has not carried out comprehensive exploration to determine the extent of its mineral wealth over the past three decades. Whereas internationally, nations and firms invest 10 percent of mineral production into exploration, in Zimbabwe that figure is a dismal 1 percent.

Zimbabwe is set to increase its mining output by a staggering 44% in 2011; consequently, it will need to explore the equivalent of its mineral output just to keep reserves even and a 1 percent exploration rate simply will not cut it.

Each and every Zimbabwean is privileged in that they were born into the country with the greatest riches on earth. The International Monetary Fund’s Natural Resources Per Capita index attests to this fact. Therefore, it is up to each and every Zimbabwean to insist that their government and mining sector unlock the unrivalled wealth beneath their feet for the benefit of all by conducting levels of exploration that are befitting of such a resource rich nation.

By Garikai Chengu.

The author is a researcher at Harvard University.

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Discussion

4 thoughts on “Exploration will turn Zimbabwe into Jewel of Africa

  1. Good facts Gary. Now tell us more about the Zimbabwean market so that we can have a fair appreciation of the market before investing our monies

    Posted by vic | August 2, 2011, 2:39 pm
  2. ‘Zimbabwe is the richest country on earth with respect to untapped natural resources per person” – This statement is not only misleading but it’s not true. Mineral recognisances that have been carried out on mineral potential in Zimbabwe, shows a completely different picture. Minerals worth to be considered by large scale mining companies includes: coal, The coal quality in Zimbabwe is low in sulphur and high calorific value, however the coal is too far from the sea, which is a major deterrent for any investor, distance from the sea is more than 1800 km to the nearest sea port. Is there a railway line – No. This is why Vale is struggling to commence mining operations in the Tete Province in Mozambique. They are thinking of using a badge along the Zambezi River! The distance to the sea is less than 600 km. Again the coal quality in Zimbabwe is not as good as that of Indonesia or Australia, Australia has some mega mines like Black water which stretches over 60 kms. That is like between Gweru and Kwekwe! Distance to the sea in both countries is less than 600km; China is struggling to develop its coal deposits because of the distance to the nearest sea. Platinum Group metals (PGM) along the Great Dyke , there are four occurrence, Mimosa, Unki, Hartley and the Snakes Head, . The snake head, its unlikely to be mined because of its geological problems. Hartley there is potential to establish about 20 medium sized mines. (Remember the PGM resources in Zimbabwe are less than 10% of the South African resources. The grade ( quality) is not that good anywhere ) Diamonds are in abundance and yes, most of the occurrences are industrial diamonds. For a company like Mbada or Marange Resources which has never mined anywhere before, this is a big story. The reasons why there is so much noise about diamonds in Zimbabwe is because people know that once diamond enter into your blood they become blood diamonds. Remember Seira Leone. Now that there is peace in Sierra Leone there are very few companies mining diamonds. Because its not in abundance. The Biggest deposit in Zimbabwe is in Mwenezi, yet to be explored. The deposit is as big as the Venetia Mine in South Africa but the grade is less than 8 Carats/ Hundred tonnes. Compare this to Botswana where the grades are in access of 250 and the ore bodies are in several hectares in size. Iron ore yes, but there is a problem in manganese the manganese is very high and this gives problems in blast furnace, hence less interest. To export, again the distance is too far from the sea. Companies are focusing on Liberia and Sierra Leone. Gold, forgot the biggest mines in Zimbabwe WERE – Dalny in Chakari, the one in Kadoma owned by Rio Tinto, Globe and Phoneix in Kwekwe and How in Bulawayo. These mines even in there hay days are still small by international standards; there is no comparisons to mines along the Greenstone belt in Lake Victoria in Tanzania. Geita alone produces more gold in one month than the combined output of all the mines in Zimbabwe. Say the political problems are resolved and Zimbabwe is considered to be one of the best destination for Foreign Direct Investments in the whole world, what you will find, is that Zimbabwe will be flooded by small venture capital companies from Australia and Canada, looking for BONANZA deposit, the moment the discover something no matter how small they make big announcements, and the share price will go up, and they make millions and at times disappear. (This is what happened in Botswana in 2008 – coal and diamond). The gold deposits in Zimbabwe are heavily disseminated, patch and with some “surprises” high grades, there are also narrow. For a poor individual like me, this makes sense l will be rich but for Barrick, the investment is not worth it. That why Barrick is not exploring in Zimbabwe but in DRC for Gold. Barrick is the biggest Gold Mining Company in the world. Exploration by its nature is risk and very expensive. The government is misinformed to form an exploration company, that company will be dead in few years from now. State mining and exploration companies are inefficient and ineffective vehicles for developing any mine. Look at the history in Southern Africa, STAMICO- state mining company of Tanzania is dead, GECA Mines in DRC- dead, Zambia Consolidated Copper Mines – dead , Edigma in Angola almost dead and in Zimbabwe – ZMDC is it dead or dying! Exploration is best carried out by private companies especially the greed venture capital companies. The government must have legislation that any one carrying out exploration should submit results to the Geological Survey of Zimbabwe; in turn this information can be shared with new investors, thereby cutting the costs. “Let government govern and let private sector do business” – Jakaya Mrisho Kikwete President of Tanzania. Knowledge acquired from school fees paid to STAMICO over the years.

    Posted by Mashauri Tumaini Masunga | September 8, 2011, 3:35 pm
  3. Great but you don’t want foreign investors in Zimbabwe right? Or you want their money but not their operations? Perhaps you want to look east but still only want their money not their operations?

    Posted by garikaichengu | November 8, 2011, 7:52 am

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