Zimbabwe Mining Activity Puts Pressure on Power Industry

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Researched by Industrial Info Resources (Sugar Land, Texas)--Zimbabwe holds promising medium-term mining prospects, including some for gold and the platinum group of metals, coal, nickel and diamonds. Currently, potential is hindered by government interventions and an unstable political climate, but both major and junior international mining companies are positioning themselves for new and existing operations.

Increased mining activity will put pressure on Zimbabwe's infrastructure, particularly on power generation. Although energy projects worth $6 billion have been approved by the government in the past year, there is little hope of them alleviating chronic shortages in the power supply, which reached 1,400 MW after the $100 million refurbishment of the 500-MW Hwange thermal power station. Nominal installed capacity in the system is 2,000 MW, and demand stands at about 2,200 MW. Demand is forecast to reach 2,650 MW in 2015 at the current rate of growth in demand of 2.5% per year. If the mining sector looks at an upside scenario for greenfield projects, then demand by 2015 could be much higher than the given figure or, alternatively, the ongoing conditions will see projects stalled because of lack of power and by the government's project and company indigenization policies.

There are two large-scale thermal power projects on the table: the 2,000-MW Lusulu plant and the 2,400-MW Gokwe Sengwa plant. Both will take an investment of about $3 billion.

Sengwa is a project developed by the local mining group RioZim that targets the first 600 MW of power operational in 2014 and will receive coal fuel feed from the Sengwa mine, a 50:50 joint venture with Rio Tinto plc (NYSE:RIO) (London, England), which divested from to RioZim in 2004. The full 2,400 MW is scheduled for 2020. The government is also proposing to put $30 million into the refurbishment of smaller units and add another fast-tracked 400 MW to the system. The old Bulawayo plant has been recommissioned, adding 100 MW.

Zimbabwe signed an agreement to import 100 MW from the Democratic Republic of Congo, but is contractually bound to export 150 MW from Hwange to Namibia. In 2010, the country imported 275 MW from Zambia and Mozambique. In February, mining company Zimplats Holdings Limited (OTC:ZMPLF) (Guernsey, Channel Islands) signed an agreement to import 100 MW from Mozambique. Other mining companies have signed continuous supply agreements with state utility ZESA to secure power supplies and increase output, avoiding the constant threat of load shedding.

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