Zimbabwe Annual Min ining Conference 31 May 2019 MAXIMIZING GROWTH, BENEFICIATION AND VALUE ADDITION OF THE FERROCHROME INDUSTRY FEEDBACK FROM THE INTERNATIONAL CHROMIMUM DEVELOPMENT ASSOCIATION (ICDA) CONFERENCE Presented by John Musekiwa CEO-Zimasco Chairman-the Confederation of Ferrochrome Industries of Zimbabwe (CFeCrIZ) 1
Disclaimer This presentation is for information purposes only . Whilst the information contained herein has been prepared in good faith, neither Zimasco (Private) Limited (the “Company”), or the Confederation of Ferrochrome industries in Zimbabwe (the “ CFeCrIZ ”) nor any of the directors, officers, employees, agents or advisers of the Company or CFeCrIZ makes any representation or warranty in respect of the fairness, accuracy or completeness of the information or opinions contained in this presentation and no responsibility or liability will be accepted in connection with the same. The information contained herein is provided as at the date of this presentation and is subject to updating, completion, revision, verification and further amendment without notice. The presentation materials contain forward-looking statements in relation to the subject matter. By its very nature, such forward-looking information requires the Company and CFeCrIZ to make assumptions that may not materialise or that may not be accurate. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the control of the Company and CFeCrIZ that could cause the actual performance or achievements to be materially different from any future results, performance or achievements expressed or implied by inclusion of forecasts. Nothing in this presentation should be construed as a definitive forecast. 2
Presentation Outline • Chromium Flowchart • Overview and current status of the Zimbabwe Chrome Industry • Chrome Ore • Ferrochrome • Beneficiation of Chrome in Zimbabwe • Future Status • Requirements for the Growth of the Industry • ICDA Feedback • Conference • Market Outlook • Conclusion 3
Chromium world flowchart- Source Roskill Metallurgical grade chromite is predominantly smelted to produce ferrochrome used in steel alloys (predominantly stainless steel). Small amounts of metallurgical grade chromite are used in the production of chromium chemicals, foundry sands and refractories. End of life material is recirculated as scrap, predominantly for stainless steel production
Overv rview of f Zimbabwe Chrome In Industry ry Zimbabwe holds the world’s Global Distribution of Chromite Resources second largest chrome ore 1% 1% reserves, second only to 2% 7% South Africa. Global 5% RSA Resources estimated in excess 12% Zimbabwe Kazakhstan of 12 billion metric tonnes Finland India (Source Roskill : Chromium 72% Turkey Rest of the World Global Industry Markets and Outlook to 2018, 14 th edition) Source: ICDA 2015 5
Chrome Ore • Chrome resources in Zimbabwe occur in two forms which are podiform & stratiform. • Podiform deposits occur just off the world famous geological feature stretching across Zimbabwe, namely the Great Dyke and are found in the Midlands and Mashava areas in the South of the country. • Stratiform deposits (seams) occur throughout the length of the Great Dyke from Guruve in the North down to Mberengwa in the South. 6
Chrome ore- current status • From the limited exploration , the known chrome ore resources occur approximately 60% as lumpy (which is ideal for smelting) and 40% as friable ores or fines. • Mining of the lumpy ore is carried out in large part by semi-mechanised medium sized players and small scale miners from open pit operations. The near future will see an increase in underground mines as the open - pittable resource is dwindling. • Friable ores and fines are currently processed via medium sized concentrator washing plants where material is upgraded. • 2018 chromite ore production totalled 1.4 million tonnes, approximately 3.5% of global production. 7
Ferrochrome • The highest level of beneficiation of chrome ore in Zimbabwe is production of ferrochrome • Due to the good quality of its chrome ore resource, Zimbabwe largely produces Mid- High carbon ferrochrome (52-60% Cr). This is compared to charge chrome which is the main type of ferrochrome produced in RSA where the %Cr is typically 47-52%. • Smelting is energy intensive and electricity constitutes the highest production cost component in Zimbabwe 8
Ferrochrome Current status • Zimbabwe currently has 14 ferrochrome operations mainly concentrated in the Midlands Province with the larger players (Zimasco, Afrochine) utilizing medium sized furnaces and the smaller operations using small furnaces. • Production in 2018 totalled 365 kmt, which is around 2.5% of global output. 9
Beneficiation of f Chrome in in Zimbabwe • Chromium has no substitute in stainless steel production, which is the back bone for all global economic growth, hence it is a strategic global commodity. • With an estimated 12% of the global chromite resources and its chrome ore and ferrochrome production currently contributing less than 3% to global output, the Zimbabwean chrome ore industry has significant potential for growth 10
Chrome Ore – Future Status • The increased ferrochrome capacity ZIMBABWE CHROMITE ORE PRODUCTION 2016-2022 on line will see increased chromite ore ('000mt) production in 2019 y-o-y of ~40% SOURCE MMCZ, CFeCrIZ compared to 2018 (assumes adequate 3,500 3,141 electricity supply). 2,874 3,000 • Future years will see chromite ore 2,367 2,500 production increase in line with the growth of ferrochrome production. 1,901 2,000 • Chromite ore exports in 2018 totalled 1,500 1,358 800 kmt. 891 1,000 • Government’s thrust is towards value 594 addition and beneficiation therefore 500 future years will likely see a decrease - in chromite ore exports as focus shifts 2016 2017 2018 2019 2020 2021 2022 to increasing ferrochrome production. kmt 11
Ferrochrome – Future Status • With new capacity already commissioned, output is forecast to increase by 15% in 2019 y- ZIMBABWE FERROCHROME PRODUCTION 2016 -2022 o-y to 419,000 mt. ( '000mt) SOURCE MMCZ & CFePIZ • Resumption of operations at Zimbabwe Alloys 1200 on the back of refurbishments currently underway, coupled with expansion of production from Zimasco will see output 956 1000 ramping up in the coming years 850 • As part of the roadmap to Tsingshan’s stainless 800 steel production in Zimbabwe by 2026, 647 Afrochine, which is a subsidiary of Tsingshan 600 (largest global stainless steel producer) will also 419 expand its ferrochrome production going 365 400 forward. 309 • The expansions will see Zimbabwe’s 164 200 ferrochrome production capacity rise to almost one million tonnes (956 kmt) by 2022. 0 • The Zimbabwe ferrochrome Industry growth 2016 2017 2018 2019 2020 2021 2022 path dovetails with Vision 2030. kmt 12
Requirements for Growth of f th the Zimbabwe Chrome In Industry Conducive environment / Policy clarity and consistency Access to Capital / Attraction of investment (domestic and foreign) Further Exploration to increase knowledge and confidence in the grades and tonnages and to locate new ore bodies Innovation /new methods to tackle the mining of narrow seams on the Great Dyke Introduction of newer more efficient smelting technologies Availability of affordable power for mining and smelting Recapitalisation of the road and rail network Increased foreign currency retention for viability 13
ICD Conference Feedback • The International Chromium Development Association is The voice of the global chromium industry since 1984. With more than 100 companies as members across the chromium industry value chain, the ICDA is the authoritative voice of the industry. • 250 delegates attended the conference which, for the first time in its 35 year history was officially opened by a Head of State (His Excellency E.D. Mnangagwa) • 24 countries from across the globe were represented at the Conference which was an • A day before the main conference a technical tour which was sponsored by Afrochine and Zimasco to see Afrochine Ferrochrome smelter which has just commissioned two new furnaces was held. This was very well received . All the delegates gave enthusiastic feedback commending the organizers and were impressed with the Afrochine Smelter. • Feedback from delegates on the conference was extremely positive. For most of the delegates it was a first-time in Zimbabwe. Delegates left with better knowledge of the Zimbabwe chrome ecosystem and many were planning to return in the near future to look at investment opportunities • ICDA believes that Zimbabwe should play a bigger role in ICDA and there must be regular information on local developments • A major common comment from traders was related to the need for transparency on pricing and export of chrome ore via the MMCZ • Delegates indicated that they would appreciate a conference in Zimbabwe in the next 3 years to assess developments and opportunities. 14
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