EDITORIAL COMMENT: Don’t throw caution to the FDI wind

EDITORIAL COMMENT: Don’t throw caution to the FDI wind
Finance and Economic Development Minister Patrick Chinamasa and the Reserve Bank of Zimbabwe governor, John Mangudya

Finance and Economic Planning, Minister Patrick Chinamasa and the Reserve Bank of Zimbabwe governor, John Mangudya

TODAY, as in 2009, intrepid mining investors are casting a fresh look at Zimbabwe.
Today, as a decade ago, Zimbabwe finds itself on the map for holding viable reserves of a globally significant, lucrative and strategic mineral within its largely unexplored bowels.
Today, as she did yesterday, Zimbabwe could find herself making the same mistakes it made yesterday.
With considerable diamond and lithium reserves, Zimbabwe possesses the hardest and lightest known minerals, respectively. This is almost a metaphor for the hard, not light, decisions the country’s leadership has to make over its resources.
After all, Zimbabwe is primed to be a major global player in the lithium industry. That the Arcadia deposit, on the fringes of Harare, holds Africa’s largest hard rock lithium reserves and is one of the top 10 deposits in the world, confirms this.
The firm exploring the Arcadia deposit, Australian-listed Prospect Resources, has attracted capital from some of the world’s leading funds, including JP Morgan, Citi Corp, BNP Paribas and MBM Capital Partners, the third single largest shareholder in the company.
Last week, after much speculation over the ZMDC’s unnamed partner in the Kamativi lithium project, a Canadian junior, Chimata Gold Corporation, revealed itself as the suitor.
Announcing that it had been tapped for the project, which government forecasts to generate US$1,4 billion over eight years, Chimata said it sought to raise the Canadian equivalent of US$1,6 million in a private placement to fund that transaction that will give it a foothold in the unfolding Zimbabwe lithium play.
We do not presume to know how much processing lithium tailings deposits entails financially, but the modest Chimata capital raise evokes memories of the low-capital, high-return investments the Marange private players — none of which had any diamond mining pedigree — enjoyed.
Chimata is itself a modest company, with less than half a million dollars in assets, and two projects at the exploratory stage.
The Chimata, Zimbabwe Lithium Company and ZMDC partnership could well work out for the best. But it could also not work out, which is why government needs to proceed with caution and with the benefit of experiences from our ill-fated Marange partnerships.
No sector thirsts for capital as much as our under-capitalised, under-explored mining sector. However, we must not disregard basic due diligence in our quest for capital.
Doing so risks ceding the family jewels for a song.
Of the elusive Marange benefits, we could salvage one — being wide-eyed as we court capital.

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