Small scale miners yearn for ferrochrome smelters

Lovemore Zigara
THE government’s decision to lift a four-year ban on exporting raw chrome mid-last year gave hope to a sector that was on the verge of collapsing. It was sweet music to the ears of most artisanal chrome miners and companies who were stuck with piles of chrome ore. The ban on exporting raw chrome, effected in April 2011, had its advocators, mainly in the government. It was widely hailed as a positive move towards realising value addition and beneficiation.

But others, mostly the artisanal miners, saw it as having a debilitating effect on the chrome mining sector. It was like putting a cart before the horse as the local ferrochrome smelters did not have the capacity to smelt the mineral which led to stockpiles of the mineral which could not be exported.

Players in the chrome-mining sector’s desire to value add and beneficiate the ore before exporting was being hamstrung by lack of funding. The players, however, agree with the government on the need to beneficiate and value-add the chrome ore before exporting it.

Before the government announced the lifting of the chrome export ban in June last year, chrome miners had stockpiles of 500,000 tonnes of the commodity. This was against depressed international chrome prices on the market which had plummeted by an average of 50 percent.

The metal was fetching $120 per tonne at the time of the ban, hence the country lost millions of dollars in potential revenue. International economist and researcher, Gift Mugano, said the country lost $500 million as a result of the raw chrome export ban.

He called for an enabling environment to attract Foreign Direct Investment (FDIs) to access the requisite technology for the country to have capacity to value add and beneficiate its minerals.

“We need value addition to deal with the global decline of metal commodity prices. If implemented well, we will create employment up and down stream. However, we need to do this backed up with evidence. We need to ask ourselves; do we have the capacity to beneficiate and can we put a timeframe on when we would have had enough capacity to beneficiate and cease the exports of certain commodities.

“Testimony of this is the chrome ore ban in 2011 and that on its own resulted in the accumulation of chrome ore to about 500,000 tonnes which we didn’t have capacity to smelt but we had put a ban on the export of raw chrome,” said Mugano.

He argued that the logical thing was to have allowed the export of raw chrome and generated revenue for the setting up of the smelting infrastructure. “We shot ourselves in the foot since we wanted the money for the setting up of the infrastructure,” said Mugano.

Mangemba Miti Mhlanga, a small-scale miner, said most of the smelters are owned by the Chinese who were dictating the operations. He wants the government to help capacitate small-scale miners and help them set up their own smelters if the sector is to be viable.

“It’s the Chinese who own the smelters and determine the price of chrome. At the end of the day, it becomes unviable for one to continue in the business. As small scale miners we need our own smelters. Even if the international price is depressed the miner is cushioned because the smelter is his,” he said.

The government has since come up with a $100 million special purpose vehicle through Apple Bridge Investments to buy the mineral at international prices to empower local miners.

Value addition and beneficiation is given prominence in the country’s economic blueprint, Zim-Asset, launched in 2013 towards the country’s harmonised elections. Zim-Asset recognises the mining sector as a driving force in the country’s economic turnaround efforts.

Under the economic blue-print, all minerals will be value added and beneficiated so as to fetch better prices on the international market.

Depressed chrome prices on the world market coupled with the Western imposed illegal sanctions on Zimbabwe have seen the country’s biggest chrome smelting companies like Zimbabwe Alloys (Zim-Alloys) and Zimbabwe Smelting Company (Zimasco) struggling. The two giant chrome smelting companies have been on their knees for years now. They were operating at less than 10 percent capacity in 2008.

They were also still to fully recover from the operational environment of 2008 which was the peak of the country’s economic challenges.

ZimAlloys — now under judicial management — is now operating at 25 percent capacity utilisation while Zimasco, the country’s largest ferrochrome processor, is struggling to remain on its feet. Zimasco still cannot absorb chrome ore for smelting, leaving small-scale miners who operate on its tributaries in a quandary.

The government, sympathising with the small-scale chrome miners, recently ordered Zimasco to allow miners on its tributaries to sell the metal to markets of their choice since it did not have capacity to buy the commodity.

Both Zimasco and ZimAlloys bind small-scale miners who operate at their respective tributaries to sell their ore exclusively to them.

Other small smelting companies which came on board during the difficult years also lacked the capacity to consume the chrome ore. Plummeting ferrochrome prices on the world market did not help their cause resulting in the emerging companies being stuck with huge stockpiles of the metal.

Many chrome mining companies such as ZOL Mining and Wel Mining collapsed while some small-scale miners were forced to abandon chrome ore mining in favour of minerals fetching better prices such as gold.

This resulted in massive unemployment and disinvestment in the chrome mining sector. Prior to 2011, statistics from the Zimbabwe Miners Federation (ZMF) indicated that 70 percent of the small-scale miners abandoned the mineral.

Zimasco, which employed over 3,500 employees at its peak, is now left with just under 1,000 workers as at December last year, while ZimAlloys now employs 300 workers from the more than 3,000 strong workers at the turn of the millennium.

Confederation of Zimbabwe Small Scale Chrome Miners (CZSSCM) president, Fred Ncube, who leads the lobby group which represents the interests of chrome miners, said there is a need to “harmonise chrome pricing with the Minerals Marketing Corporation of Zimbabwe and the government coming up with a uniform price of chrome as most chrome miners are at the mercy of chrome smelters.”

In his response to issues raised by small-scale miners, Mines and Mining Development Minister, Walter Chidhakwa, said ferrochrome smelters should adopt the latest technology which is cost efficient and have a return on both the smelter and small-scale miner.

“We can’t control the external factors such as the price of chrome because we get the price of chrome from the international market but what we can control is the cost of production by making sure that we adopt technologies that are efficient.

“We want to make sure that we skill our people sufficiently such that their level of productivity goes up and the cost comes down. We then look at the prices vis-à-vis the cost and then we are making a profit,” said the minister.

However, the government can borrow a leaf from its counterpart, South Africa, which has formulated a beneficiation strategy for its minerals industry under its blueprint, New Growth Path (NGP) of 2011. The blueprint seeks to “create more inclusive economic growth by systematically encouraging more labour absorptive economic activities.”

The NGP identifies mineral beneficiation as one of the priority growth nodes for job creation which outlines 10 strategic mineral commodities, from which five value chains are selected.

Under the strategy, chrome is found under the iron and steel value chain. To deal with the anti-competitive pricing practices in the steel industry in that country, the government has encouraged the setting up of stainless steel plants which have insulated the country from plummeting global metal prices as the country is now exporting finished stainless steel products instead of just beneficiating raw chrome to ferrochrome.

To buttress local production of stainless steel products, the responsible minister is empowered to put mechanisms “to protect and support the competitiveness of existing intermediary plants, such as ferro-chrome smelters” as well as to “promote the beneficiation of minerals in the Republic.”

The South African model amplifies the need for the Zimbabwean government to formulate an industrilisation policy to support Zim-Asset and accelerate the enactment of the Mines and Minerals Amendment Bill which has been gathering dust since 2011. This will result in the country attaining incremental GDP growth in mineral value addition per capita.

The starting point would be to offer incentives to the country’s ferrochrome smelters and those who want to start new plants using the latest technology so that the country has the capacity to smelt its own chrome reserves before it further goes to create value chains in the chrome and related industries.

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