Zimbabwean Chrome Sector on Brink of Collapse

Zimbabwean officials’ decision to lift the country’s ban on raw chrome ore exports was intended to save the industry from the brink of collapse, but is being hailed as “too little too late” by industry experts.

Gift Chimanikire, the country’s deputy minister of mines, recently announced government plans to temporarily lift a ban on chrome ore exports to allow companies to clear stockpiles that have accumulated since an export ban was implemented in April 2011.

However, the lifting of the ban will be accompanied by a sales tax that many feel will create yet another barrier for the already-battered industry. At present, margins are tight given the current lull in raw chromium prices, which have averaged $165 to $185/tonne since August, down from $230/tonne back in May.

In an interview with the Zimbabwe Independent, mining expert and past president of the Chamber of Mines of Zimbabwe, Victor Gapare, claimed that the idea of charging a levy on chrome ore exports needs to be revised as a result of current market prices.

“At the moment, chrome ore and ferrochrome prices are at relatively low levels and it’s difficult to see how chrome ore producers can be viable if an additional levy is imposed on them. A levy on the chrome ore will have the same effect as the banning of chrome ore exports due to economics,” he said.

Gapare also noted that while there is a need to develop adequate smelting capacity, other areas of focus, such as adequate power provision, need to be dealt with first. Presently, the country’s largest chrome smelter, located at Zimasco, does not have adequate capacity to process the chrome ore being produced, even with the help of other smaller smelters.

Noting Zimbabwe’s exorbitant power costs, local players will be increasingly concerned as chrome ore tends to move from countries with higher electricity costs to countries with lower or subsidized energy costs. That is the case with China, which has become a major producer of ferrochrome despite not being a major producer of chrome ore.

As a result of China’s competitive advantage in terms of electricity costs, mining powerhouses such as South Africa have recently increased chrome ore exports to the Asian hub.

State-owned Indian firm in court

India’s state-owned Odisha Mining (OMC) is embroiled in legal controversy over its decision to sell chrome ore of the same grade at the same location at different prices, with a former MP challenging the firm’s auction procedure in court.

“In the matter of auction sale of chrome ore/chrome concentrate by fixing two different rates for the same material for Odisha-based and outside Odisha-based bidders, (OMC) not only committed irregularities in the matter of sale of the precious chrome ore but also caused huge loss to the government,” Balgopal Mishra said in his petition to the Orissa High Court. The case relates to OMC tenders floated for auction sale of chrome ore and concentrate on September 3. The chrome sold was from the company’s Kaliapani and South Kaliapani mines, both located in Jajpur.

Mishra has also challenged OMC’s decision to supply chrome ore to private companies that have mining leases for chromite mines.

Mining giant gets tough on striking workers

Swiss mining giant Xstrata (LSE:XTA) confirmed that it fired 400 workers after an illegal strike at one of its South African mines.

The deadline has now passed for the workers to return to their posts at the Kroondal chrome mine, near Johannesburg. The workers, who downed their tools in late October over disagreements relating to an internal disciplinary system, were given 24 hours to appeal their dismissals.

Xstrata spokesman Christopher Tsatsawane told Mining Weekly, “[w]e have sent the strikers in this illegal strike an ultimatum to urge them to come back to work. Three ultimatum notices have been sent out, without any positive response. A notice signalling the intention to dismiss followed this, still with no response. Technically, the strikers are dismissed; however, they still have 24 hours to appeal their dismissal.”

Thousands of mine workers have been fired and then rehired during a spate of strikes that spread across mines in South Africa in August.

Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.