$1,4bn lithium deal sealed
Government, through the Zimbabwe Mining Development Corporation (ZMDC), last Friday struck a deal with a foreign investor to exploit lithium deposits worth $1,4 billion in Matabeleland North, a Cabinet minister said yesterday.
Feasibility studies are reportedly underway on two other lithium projects, one of which is similarly a target of an unnamed listed company. Further, a fourth project is currently being explored.
Speaking here yesterday at an investors’ breakfast meeting on mining in Zimbabwe jointly sponsored by Sakunda Holdings and the Moti Group, Mines and Mining Development Minister Winston Chitando said an announcement on the new deal will be made “in a day or two”. Most of the inquiries that have been received by the new political administration, he said, have been specifically on lithium.
“There is lithium and it’s quite exciting. I can say over the last few weeks since my appointment as minister, most of the enquiries are on lithium. On Friday last week, Zimbabwe Mining Development Corporation (ZMDC) managed to close a deal with an investor for part of its lithium deposits, and I am sure an announcement will be made in a day or two — it involves a quoted company,” said Minister Chitando.
“We have another quoted company, which is quite active on lithium assets, getting close to finalising a bankable feasibility study. We also have two other lithium assets, where some exploration work is taking place,” he said.
In an interview with The Herald after the event, Minister Chitando said the lithium deal, which mainly involves the reprocessing of dump, would unlock more than $1,4 billion over the next few years. It is believed that the investor will begin work on the site in March.
Government believes that the investment, which is part of the 100-day programme, will employ 500 people and have an “immense” impact on the local economy, especially for downstream and upstream industries.
“Firstly, the investment is in Matabeleland North and the initial investment, involves reprocessing of dump, which has got $1,4 billion worth of lithium to be unlocked, and the investment has been struck with an investor who will come in with capital. We will see the investor coming in by March 1 and doing some infrastructural work relating to rehabilitation of schools, clinics to support the envisaged investment,” he said.
“And we envisage that directly this investment will employ 500 people in that particular project. But the downstream effects are quite immense.” Zimbabwe is considered to be the fifth-largest lithium producer in the world after Australia, Argentina, Chile and China. The boom in global electrical vehicle manufacturing, which uses lithium-powered batteries, has been driving demand for the mineral.
Research findings forecast that the electrical vehicle market will be worth $100 billion in two year’s time. American car manufacturer, Ford, recently invested $11 billion into its “electric car” project. Naturally, investors are scrambling for the mineral, whose deposits are largely undeveloped in areas such as Mberengwa, Mutoko and areas around Harare. But of late, Government has been driving towards value-adding to lithium mining.
In the 2018 National Budget, Finance and Economic Planning Minister Mr Patrick Chinamasa announced a 5 percent tax on exports of unprocessed lithium with effect from January 1, 2019. Minister Chitando noted that though this is obviously a concern for investors, they however remain committed to their investments.
“It’s a concern which we are talking about but what is important is that there is seriousness to do value addition and its part of the discussion.” Under the current agreements, lithium concentrates with a grading of between 5 percent to 6 percent lithium oxide are being exported at $600 per tonne, but upon beneficiation, the product is sold at prices between $15 000 and $20 000.
However, the new Government’s charm offensive seems to be winning over potential investors.
While making a contribution at yesterday’s event, Mr Wilfried Pabst, chairperson of the African Metals Management Services Limited – a company that has a controlling shareholding in lithium producer Bikita Minerals – said President Mnangagwa made a “very wise decision” to chose Mr Chitando to head the mines ministry as he has a sound background in the sector.
“I can’t tell you how encouraged I am to see a man from us, a man from the industry heading that ministry; that is the single most encouraging thing, for me as a German investor that has happened to your country,” he said.
Though Mr Pabst, who has been had a presence in the country for the past 26 years, implored Government to cut on the bureaucracy which is slowing the industry down, he noted that “this is a time to invest; it is now”. Yesterday’s breakfast meeting was held on the sidelines of the 2018 Mining Indaba, which ends on Thursday.