Zimbabwe is the richest country on earth with respect to untapped natural resources per person. The mineral exploration of a nation with the world’s largest diamond reserves, second largest platinum reserves and over 40 exploitable minerals has the potential to turn Zimbabwe into the jewel of Africa.
Mineral exploration is the process by which companies or organisations seek to discover commercially feasible concentrations of mineral resources. Exploration covers activities from the preliminary collection of existing geological data to drilling and sample assays.
The information concerning the nation’s mineral wealth that can be obtained by exploration will simultaneously attract foreign investment as well as strengthen the value of mines and claims already in indigenous hands. This shall set the necessary preconditions for egalitarian and indigenously driven growth in the mining industry.
In order to illustrate how exploration can be an explosive catalyst for growth, one must, firstly, highlight the importance of exploration to both the local community and the nation at large. Secondly, a fund for exploration purposes must be established and can be capitalised by large foreign mining companies as an empowerment credit, permitting companies not to cede a portion of the 51% local shareholding requirement. The Exploration Fund would explore the millions of hectares held by small and medium scale miners in order to boost the value of the claims and in turn increase small miners’ wealth. Finally, exploration may be the key to attracting the estimated five billion within the next five years in foreign investment required to restore Zimbabwe’s mining industry to its former glory.
As Zimbabwe slowly depletes its major existing mines, discovery of new mines becomes increasingly important to meet ever growing global demand for natural resources.
For a local community or a nation, successful mineral exploration and development can lead to numerous opportunities. Some of these opportunities include new jobs—often well paying—which otherwise would not exist; new infrastructure, such as roads and electric power supplies, which are catalysts for broader, regional economic development; and increased government revenues that, in turn, can be invested in social priorities such as health care, education and poverty alleviation.
Exploration is not only important on personal, business, local and national levels, but also is crucial for Zimbabwe’s international economic and geopolitical strength. Put simply, knowing the value of what lies beneath this nation’s feet increases the nation’s worth; increasing its worth subsequently increases its wealth and power.
The impending creation of a State Exploration Company is an appreciation of this realpolitik and is certainly a step in the right direction that will estimate mineral reserves on a national level. However, funds must also be made available to small miners to explore their claims at a local level.
An Exploration Fund for small miners can be established by allowing foreign mining firms to pour money into the Exploration Fund and therefore be permitted to cede slightly less than 51% to locals. Lowering the indigenisation threshold, as suggested by the sectoral committee on mining, will simultaneously allow for money to flow into the Exploration Fund’s coffers and also encourage foreign investment.
The importance of an Exploration Fund can be underscored by the fact that firstly, it is estimated that approximately a few hundred thousand people work and live in small-scale mining communities all over Zimbabwe.
Secondly, too few of those miners appreciate the value of exploration, and of the few that do, not many have the capacity to explore, and yet exploration is the most important part of the mining cycle.
Currently, there are many local, small-scale mine owners who are oblivious to the true value of their mines due to a lack of exploration. As a result, they are happy to sell their properties for a few thousand dollars to shrewd foreign investors who sign the deal with stone cold faces, only to celebrate once the unsuspecting local has left the room. The reason for such underhanded celebration is that the investors know full well that the claims are likely to reveal millions of dollars worth of mineral reserves.
In the land of the blind, the one-eyed man is king, and those empowered with an appreciation of the value of exploration and the capacity to carry it out can clearly see the value of their mine or claim rise.
Finally, all mining investment professionals, large-scale miners, and mining academics will testify to the fact that no activity adds more value to mining than exploration. The reason for this is simple: the value of information proving that you own x amount of mineral reserves beneath your feet far exceeds the value one can ever hope to unlock by seeking to extract that resource.
Thus, if small-scale miners can use their claims as collateral to draw upon the Exploration Fund, they can conduct stage one exploration involving relatively inexpensive surveying, trenching and sampling, thereby empowering them with inferred reserves estimates for their claims.
These estimates greatly empower miners by now allowing them to either sell their claims to foreign investors at a much higher and more accurate price, or take out mining development loans on the back of their reserves. Alternatively, miners can now enter into joint ventures with investors from a more powerful, informed position. The process of exploration also indicates the best area to begin mining on a claim, thus dramatically increasing mining productivity.
Exploration by the State Exploration Company and by small miners through the Exploration Fund benefits not only Zimbabwe at a national and local level, but also the information obtained serves to render Zimbabwe a more attractive destination for foreign investment.
Internationally, mining companies are finding it increasingly difficult to extract precious metals from the earth. The discoveries of large, multi-million ounce deposits are also decreasing, and foreign miners must look to regions that tend to be geographically challenging and geopolitically hostile.
Given these factors that are pushing foreign investors from their homelands and given the buoyant prevailing mineral prices that are inducing these investors to increase spending on mining, Zimbabwe should ensure that it rolls out the red carpet and creates a conducive investment climate for this potential capital.
However, Zimbabwe’s sluggishness on the exploration front does not allow it to play a particularly welcoming host to this capital. In fact, the nation has not carried out comprehensive exploration to determine the extent of its mineral wealth over the past three decades. Whereas internationally, nations and firms invest 10 percent of mineral production into exploration, in Zimbabwe that figure is a dismal 1 percent.
Zimbabwe is set to increase its mining output by a staggering 44% in 2011; consequently, it will need to explore the equivalent of its mineral output just to keep reserves even and a 1 percent exploration rate simply will not cut it.
Each and every Zimbabwean is privileged in that they were born into the country with the greatest riches on earth. The International Monetary Fund’s Natural Resources Per Capita index attests to this fact. Therefore, it is up to each and every Zimbabwean to insist that their government and mining sector unlock the unrivalled wealth beneath their feet for the benefit of all by conducting levels of exploration that are befitting of such a resource rich nation.
By Garikai Chengu.
The author is a researcher at Harvard University.