Coronavirus hits mining output
ZIMBABWE’s mining output is expected to drop by 60 percent during the second quarter of 2020 compared to prior year due to the effects of coronavirus, the Chamber of Mines said.
In a report on the economic impact of the pandemic on the mining industry, the chamber said revenue losses are estimated to exceed US$400 million.
The losses come as most mining companies are facing reduced productivity and production due to scale down of operations on the back of lock down in transit and buyer countries.
The situation is made worse by difficulties in securing inputs for production and replacement capital due to widespread lock down in source markets.
“The revenue loss for the first 30 days arising from a total lock down exceeds US$200 million, with estimated loss for gold and platinum of about US$160 million. Potential revenue loss for nickel, ferrochrome, coal, and diamonds for the second quarter of 2020 is estimated to exceed US$100 million,” Chamber of Mines said.
The mining body said the ferrochrome industry has been the most affected with ferrochrome prices coming down to shut-down levels, even lower than those of 2015.
“Responding to the above, most smelters have been put on care and maintenance, with Zimasco having announced its care and maintenance yesterday March 25, 2020. Potnex has already closed while Afrochine are operating below 50 percent of installed capacity,” the chamber said.
The Chamber of Mines appealed to government to waiver payroll tax for the mining sector for the second quarter of 2020 to reduce payroll costs citing that a reduction in revenue has seen mining companies failing to meet payroll costs among other contractual costs.
The mining body also appealed for taxes, electricity and utilities to be paid in local dollars (RTGS) in order to allow mining companies to use the available forex to sustain care and maintenance and stay in business.
“The Chamber is appealing for a royalty holiday for the second quarter of 2020 in light of reduced revenues for mining companies. This position can be reviewed in the third quarter in line with developments in the global economy and the fight against coronavirus,” Chamber said.
The chamber also appealed that for any surrendered portion, fair compensation through an incentive scheme as is the case for gold producers be paid.
The mines body said the incentive should be reviewed to a minimum of 40 percent of gross proceeds to match local costs that are pegged at parallel market rates.