Mining shares rise on growing confidence

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Hwange is targeting increased coal production of 300 000 tonnes per month as it moves towards full capacity

Enacy  Mapakame
Zimbabwe Stock Exchange (ZSE)’s mining index has risen by 15,6 percent to 164,62 since the beginning of the year as counters gained on growing investor confidence.

At the start of 2018, the mining index was pegged at 142,4

With a 15,6 percent year-to-date (YTD) gain, the resources index has paced faster than industrials and ZSE All Share indices that have gained by 14,49 percent and 13,56 percent respectively.

The ZSE Top 10 is the biggest gainer after amassing 17 percent of value to 117,69 on gains in the market’s top capitalised counters.

For the mining stocks, RioZim jumped 22 percent followed by Falgold at 13,6 percent.

In April this year, RioZim indicated it received an exploration technology worth millions to resume exploration work for diamonds on its 3 000 hectares in Chivi, and existing gold resources.

The cutting edge technology will be used both for the gold and diamond business, and $20 million to $25 million will be spent on the diamond exploration initiative at the Chivi claims.

    Gold glittering

The mining firm anticipates further growth in gold output as last year’s production increased 31 percent to 2,1 tonnes on the back of increased production from additional mines.

RioZim last year concluded the acquisition of Dalny Mine and commissioned its Cam and Motor Gold processing plant.

Peers Falgold, have been affected by industrial action early this year although the firm resumed operations at its mines.

During the six months to March 31, 2018, Falgold reported a total comprehensive loss of $1,6 million on depressed gold production. Gross loss narrowed to $1,1 million from $1,9 million while operating loss also narrowed to $1,7 million from $2,5 million.

In January this year, workers at its Golden Quarry Mine went on strike until March 13, 2018. Total gold production for Falgold subsequently fell 35 percent to 1 920 ounces of gold for the half year period as compared to 2 970 during the same period last year on the back of the disruptions to operations.

Year-on-year, Falgold has improved by 108 percent.

Coal production

Coal miner, Hwange’s share price has been static this year although it had a 52 week increase of 46 percent. Hwange is targeting increased coal production of 300 000 tonnes per month as it moves towards full capacity.

To achieve this, Hwange indicated it would also take delivery of the remaining underground mining equipment.

During the first quarter of 2018, coal production improved by 120 percent to 232 000 tonnes from 105 000 tonnes during the same quarter in the prior year.

   Bindura fortune

Although a marginal YTD increase of 1,4 percent, nickel producer Bindura has increased 86,7 percent year on year.

Bindura reported profit after tax for the year to March 2018 jumped 857 percent to $5,8 million against the background of a $4,3 million impairment which drastically eroded profitability in the prior year.

The improvement in global nickel prices in the year also helped buoy the firm’s profitability.

Mining is one of the key economic drivers with a significant contribution to export receipts. Growth in the sector is projected at 6,1 percent for 2018.

Last year, mineral output was estimated to have grown by 8,5 percent compared to 6,9 percent in 2016, with most minerals anticipated to record further output gains in the medium term.

The sector’s contribution to total exports also grew to 69 percent from 60 percent in 2016 while direct contribution to gross domestic product increased to 12 percent from 9 percent in 2016.

This year, mineral export receipts of $2,5 billion are projected, up from $2,3 billion in 2017.

Experts anticipate further growth in the sector with investment expected on positive investor sentiment following a change in the country’s leadership last November.

Additionally, reforms to indigenisation laws to allow foreigners to have more than 49 percent of company ownership, except for diamond and platinum extraction sectors, will also be instrumental in boosting investment across the board.

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