After all the talk, lithium is proving to be a disappointment

Winston Chitando

When President E m m e r s o n M n a n g a g w a came into office in November 2017, among the hope which he gave many for a new era of production and more jobs and better living standards, was a promise to start significant lithium production as part of a general boom of the extractive industry.

The market was there, given that the country boasts of significant battery-grade lithium reserves. At least that was what the nation was told by the officials of the Ministry of Mines, including the minister, Winston Chitando.

The hope has since withered as no material results have been delivered in 18 months. Like the excitement that came with diamond discoveries around 2008, the lithium story is also fast proving to be a disappointment.

For a mineral that was touted to be the next big thing for Zimbabwe in terms of its capacity to create jobs and bring in the big bucks, lithium has been a dismal failure, at least so far.

We were told how Zimbabwe was the fifth lithium producing country in the world. Earlier this year, Minister Chitando said he was about to sign agreements on the development of lithium lead batteries.

However, production of lithium remains low and its contribution to the mining industry is close to insignificant.

New projects are yet to bear fruit. Experts say it is too soon to conclude that the new initiatives are doomed, but indications are that investors are struggling to find funds to invest in Zimbabwe given its not too-good international image (on account of resistance from Western countries against the land reform programme) and a series of policy inconsistencies – including moves that amount to expropriation in the eyes of foreign investors and decisions that have resulted in a huge currency risk, coupled with high inflation – that make the waters difficult to navigate.

For nine months in 2019, lithium production was a paltry 47,000 metric tonnes which generated US$6.05m in revenue. Standard petalite production was 21,700mt worth US$2.6m, while gravel petalite amounted to 19,949mt, worth US$1.9m.

This is insignificant as a part of the US$2.1bn generated by the mining sector between January and July 2019, with gold leading the pack at US$962m for seven months.Despite the talk, indications are that no significant investment has been made so far in lithium mining save for Prospect Resources’ project which still remains a work-in-progress largely due to funding constraints.

The government has already granted special economic zone status to Prospect Resources for its Arcadia lithium mine which has a 12-year lifespan and is estimated to generate $3bn.

The Australian-listed entity says it plans to double the lifespan of its Arcadia mine located just outside Harare on the back of exploration for new resources in the country and in the SADC region.

Lithium has a lot of potential on the global market and is seen as a game changer for Zimbabwe which boasts of one of the largest deposits in the world. The country is said to have potential to produce 20% of
global lithium.Although it is not an immediate focus, given that Prospect Resources is still at capital raising stage, for a two-phased US$600m project as Arcadia.

So far, investment worth US$30m has been spent on the project, now employing 100 people directly and 2,000 more indirectly. The company has so far produced about 200kg of lithium carbonate as a pilot to prove its capacity.The plant capacity is 2.4 million tonnes a year. The run-off feed will produce 420,000 tonnes of concentrates.

Prospect has engaged the services of the Zimbabwean government in discussions with potential financiers, with a view to start full-scale production once funding is in place.

Nick Rathjen, Prospect’s general manager (corporate affairs) told Business Times that since the groundbreaking ceremony in December 2018, the company had been focusing on funding the development of the project, with the aim of starting production within 18 months from the completion of funding.

A number of lithium projects were expected to take off and make a huge mark on the country’s finances, including Bikita Minerals which is in production, Kamativi and Zulu Lithium.

A mining expert close to the government and the Chamber of Mines of Zimbabwe said while funding could be a major hindrance for the implementation of the lithium projects, the nature of investments
could be the reason why results were yet to be achieved.

“Any form of mining project is long term and mine development takes more than 24 months,” said the expert who requested not to be named. “Exploration takes 12 to 18months, then you move to mining development. After that there is a capital raising effort which may take a long time because of the size of the projects.”

Economist Rutendo Masawi said foreign investors had watched closely the changes in the currency regime and its cost to business. As a result, they are very cautious about Zimbabwe.

“There is also the lack of transparency in the sales and declaration of revenues, an unstable economy in general, infrastructural bottlenecks, and policy unpredictability and uncertainty,” said Masawi, a research analyst with Econometer Global Capital. – Business Times