African Reserves Loans

Russia abandons Zimbabwe’s largest platinum project – Eurasia Review

Several reports monitored this month confirmed that the Russians had abandoned their lucrative platinum project contract which was signed for US$3 billion in September 2014, the platinum mine located in a sun-scorched location about 50 km northwest of Harare, the Zimbabwean capital. The reasons for the abrupt termination of the bilateral contract have still not been made public, but the Center for Natural Resource Governance in Zimbabwe has pointed to a lack of capital for the project. Thus, the site has been abandoned since the beginning of 2021.

Foreign Minister Sergei Lavrov launched the $3 billion Russian project in 2014, after years of negotiations, in hopes of improving its economic profile in Zimbabwe. The project, whose production is expected to peak at 800,000 ounces per year, involves a consortium made up of Rostekhnologii State Corporation, Vneshekonombank and Vi Holding in a joint venture with private Zimbabwean investors as well as the Zimbabwean government.

Most officials often talk about Russia, saying Zimbabwe has had a tried and tested good relationship since Soviet times, among other things supporting Robert Mugabe and his ZANU-PF against the West. Since the collapse of the Soviet era, Russia continues to maintain close political relations but its economic engagement has been staggered. Russia has attempted to improve its economic profile, the latest being seen as a milestone in September 2014, when Russia declared its interest in developing a platinum deposit at Darwendale.

The Bloomberg news agency reported on June 3 on the complicated ownership of Darwendale. He said production was originally slated to begin in 2021, but ties to Russia and a lack of capital aren’t the only reasons for the project’s delay.

The Zimbabwean government claims to control Kuvimba. But its assets, including the stake in Great Dyke, are the same as those held until at least the end of 2020 by Sotic International Ltd. This company is linked to Kudakwashe Tagwirei, an adviser to Zimbabwean President Emmerson Mnangagwa who is sanctioned by the United States and United Kingdom following allegations of corruption.

The government has not disclosed how it acquired the assets. He also did not disclose the identity of the private shareholders who own 35% of Kuvimba not owned by the state. Impala rebuffed an approach from Great Dyke because it was concerned about its property, people familiar with the matter said in February.

This opacity of its ownership has also complicated relations between Great Dyke shareholders. The project has also been thwarted by “mismanagement and mistrust,” the Center for Natural Resource Governances says in its report. “Mining operations have since ceased as the Russian investor stopped pouring money into the project,” he said.

According to Bloomberg, Darwendale has been linked to Russia since 2006, when Zimbabwe’s former president Robert Mugabe took over the concession of a local unit of South African company Impala Platinum Holdings Ltd. and sold it to Russian investors. The first company to try to exploit the deposit was called Ruschrome Mining – it included state mining company Zimbabwe Mining Development Corp., Russian defense conglomerate Rostec, Vnesheconombank and Vi Holding.

The company later became Great Dyke, named after the geological feature where the deposit is located, and Vi Holding remained the sole Russian investor. Vi Holding owner Vitaliy Machitskiy, born in Irkutsk in Siberia, is a childhood friend of Rostec chief executive Sergey Chemezov, according to Forbes. Maschitskiy has served on the board of several Rostec units, while Chemezov himself is a close ally of President Vladimir Putin, with whom he once worked in Germany. Chemezov is sanctioned by the United States, the European Union and the United Kingdom.

The Darwendale project was not put out to tender, according to information available on government websites in Russia and Zimbabwe. With its cordial relations, Russia was simply offered the lucrative mining concession without participating in any tender. After the project was launched, Brigadier General Mike Nicholas Sango, Zimbabwe’s Ambassador to the Russian Federation, told me in an email that “Russia’s largest economic commitment to Zimbabwe to date has was its deal in September 2014 to invest $3 billion in what is Zimbabwe’s biggest platinum producer. mine”.

“What will differentiate this investment from those that have been in Zimbabwe for decades is that the project will see the installation of a refinery to add value, thereby creating more jobs and secondary industries,” he said. explained Brigadier General Sango.

“We are confident that this is just the beginning of a renewed Russian-Zimbabwean economic partnership that will blossom in the years to come. Our two countries are discussing other mining agreements in addition to energy, agricultural, manufacturing and industrial projects,” Ambassador Sango added.

Later, there was another milestone in the bilateral relationship. The groundwork was laid for expanding trade and investment when Zimbabwean President Robert Mugabe met President Vladimir Putin in Moscow in May 2015. Unexpectedly, political developments ushered in a new era with the emergence of a new leader in Zimbabwe. Russia reaffirmed its commitment to work with the new leaders.

In early March 2018, during his official visit to Harare, Sergei Lavrov was received by President Emmerson Mnangagwa. Lavrov had an in-depth meeting with Vice President Constantino Chiwenga and later spoke with Minister of Foreign Affairs and International Trade Sibusiso Busi Moyo.

They acknowledged the fact that the two countries are interested in promoting a partnership in geological exploration and mineral production. They listed important areas of possible cooperation and saw the platinum deposit as the engine for the full range of trade, economic and investment ties.

“The Minister of Foreign Affairs and International Trade of the Republic of Zimbabwe, Sibusiso Busi Moyo, and I have reviewed the contacts within the framework of relations between Russia and Zimbabwe. We have focused on an integrated development project of the Darwendale platinum group metals deposit, one of the largest in the world, where Russia and Zimbabwe operate a joint venture,” Lavrov said.

According to Lavrov, Russia and Zimbabwe have very strong mutual sympathies and friendly feelings, which guarantees a very confident and effective political dialogue, including dialogue at the highest level. But now there is a need to elevate trade, economic and investment relations to a level that would respond to political and trust-based relations.

Naturally, there has always been stiff competition among foreign investors for mining projects there. In March, the same month Sergei Lavrov visited Harare, a Cypriot investor signed a $4.2 billion deal to develop a platinum mine and build a refinery in Zimbabwe, an investment including President Emmerson Mnangagwa explained that it showed that his country was open for business.

During the signing of the agreement with the Cypriot company Karo Resources, the Minister of Mines, Winston Chitando, said that work would start in July, with the first production of platinum group metals expected in 2020, aiming to reach 1 .4 million ounces per year within three years, or 2023.

As early as November 2018, President Emmerson Mnangagwa declared that his government would soon open up the platinum sector to all interested foreign investors. Zimbabwe has the second largest platinum reserves in the world after South Africa. Its government policy would guide the sector on issues such as exploration, ownership, mining, processing and sales.

Mnangagwa pledged to open Zimbabwe’s economy to the rest of the world in order to attract much-needed foreign direct investment to revive the struggling economy and make the most of opportunities to build and implement a certain number of major projects in the country. . That Zimbabwe would undergo a “painful” reform process to achieve transformation and modernization of the economy.

AFP reported that international funds are still blocked – Zimbabwe must clear its arrears before it can raise more loans needed to rebuild the country. With a total debt of $16.9 billion, it announced that it would clear nearly $2 billion in arrears with the African Development Bank and the World Bank by October 2019.

Zimbabwe has various sectors besides mining. There is a possibility of greater participation of Russian economic operators in development processes in Zimbabwe and Southern Africa. But the Russians must move from too much rhetoric to concrete economic engagement over the next few years. Diplomatic relations between Zimbabwe and Russia have already marked the 40th year.

Zimbabwe, a landlocked country in southern Africa, shares a border of 200 kilometers to the south with South Africa, bounded to the southwest and west by Botswana, to the north by Zambia and to the northeast and to the east by Mozambique. Zimbabwe is a member of the Southern African Development Community (SADC).