and how Zimbabwe should position itself Minerals & Natural Resources The African Panacea* and how Zimbabwe should position itself A paper presented by Hon. Christopher Mutsvangwa The Deputy Minister of Foreign Affairs *Definition Panacea: a solution or remedy for all difficulties

A brief profile of the presenter: C.H.MUTSVANGWA Bachelor of Business Finance, Dip MIS, Master of Public Administration, (New York, USA) Ambassador Mutsvangwa is a well accomplished public figure and strategist. His experience dates back to the pre-independence era where he left the University of Rhodesia to join the liberation struggle. After independence, he worked with a large number of public bodies which include; The Constitutional Commission of Zimbabwe (1999), Harare City Council (as a Commissioner in 2002), board member of Transmedia Corporate for Broadcasting Transmission (2001) and he has also sat on the Morgan Zintec Advisory Council as its Chairman. Ambassador Mutsvangwa served as the Ambassador of Zimbabwe to China for the period 2002-2007. During his tenure he oversaw the trebling of trade between Zimbabwe and China from US$140 million to US$380 million by 2006. He also facilitated a number of public and private sector investment projects during his tenure as Ambassador. He has made presentations to and attended a number of international and local conferences spanning a wide array of strategic and economic issues. Currently he is the Managing Director of Moncris (Pvt) Limited. A photograph of the Amb. C.Mutsvangwa Greeting His Excellency Hu Jintao ,the President of the People’s Republic of China

Below are some the private and public sector projects which Hon Below are some the private and public sector projects which Hon. Mutsvangwa facilitated during his tour of duty as Ambassador to China Zimbabwean Company Chinese Company Nature of the Transaction   National Railways of Zimbabwe (NRZ) China National Railways The establishment of line of credit to purchase locomotives Tobacco Industry China Tobacco Established a contract farming system that assists indigenous farmers . turnover $1.3 B Road Motor Services (RMS) CAMCO The Procurement of 78 30-tonne trucks Zimbabwe National Army (ZNA) Beijing Autoworks (BAW) The Supply of 160 pickup trucks Forestry Company of Zimbabwe China Northern Industries (NORINCO) The supply of 10 Deutz engines ZANU (PF) Shenzhen Printing Co. The Procurement of 500 000 t-shirts for the 2005 parliamentary elections Government of Zimbabwe CMCC The supply of fertilizer and agro chemicals worth $200 million Air Zimbabwe Government of China Establish Air Zimbabwe' s direct flight from Harare to Beijing & Harare to Guangzhou CATIC The supply of three aircrafts the MA60 Farmer's World The supply of tractors and dump trucks ZMDC The supply and delivery of 10 dump trucks Limpopo Motors Hongdu Motorbikes The supply and delivery of 100 motorbikes Transmedia Star Corporation The procurement of transmission equipment worth $64 million

Some of the world’s largest fund managers share Ambassador’s views on the potential of natural resources and minerals to elevate African economies MARK MOBIUS, Executive Chairman Franklin Templeton frontier markets such as Zimbabwe offer the same investment attractiveness which was available in BRIC countries during their major stages of development GOLDMAN SACHS it is estimated by Goldman Sachs that Africa will have the largest workforce in the world by the middle of the century. “Demographics are becoming very favorable and will be the envy of the world in 20 years time WORLD BANK The World Bank wants to launch a $1 billion fund in July to map the mineral resources of Africa, using satellites and airborne surveys to fill geological gaps across the continent where a lack of adequate data hampers mining investments Sub-Saharan Africa attracted $1.6 billion of private equity investment in 2013, the most in five years,

Note this chain lead to creation of trade hub know as London Metal The positive outlook on Africa is based upon Asia’s demand for Africa’s natural resources Mineral Supply Chain (Circa 1900-2000) Mineral Supply Chain (Circa 2000- ) Africa Africa Western World Asia Western World Note this chain lead to creation of trade hub know as London Metal Exchange Asia Western capital now faces stern challenge from EXIM Banks RICS and emerging market SWF to secure minerals - all to the benefit of Africa

China’s demand for commodities from the emerging markets is expected to remain strong for the next 20 years Latin America and Africa will continue to profit from the projected surge in Chinese commodity importsC Source: Deutsche Bank Research

A snapshot of some of Zimbabwe’s mineral use and their commercial use Comment Platinum Catalytic Converters Currently there are estimates of 1 billion cars on the roads, CNBC predicts that number to expand to 1.7 Billion by 2035 Aluminium Containers carbonated drinks I am sure the world population will still be drinking Coca Cola fifty years from now Chromium Catalyst stainless steel production Zimbabwe’s chrome reserves in the great dyke can almost be described as infinite Coal Core input in power plants Current rough estimation a reserve of 11 billion tonnes Cobalt Treatment of cancer A special isotope called radioactive Cobalt-60 Corundum Sand paper, abrasives, grinding wheels Second hardest mineral in the world behind diamond Lithium Mobile phone Batteries Everybody has a cell phone Tungsten Filament in light bulbs Tungsten has highest melting point of all metals Tantalum Used in making surgical appliances Can be used for bone/hip replacements. No immune response to mammals This list is endless

Which Investors have the largest appetite for our resources- THE SWFs over $6 trillion Interesting to note: The World Bank which has been the traditional source of funding has total assets of $338 billion. Maybe Zimbabwe should shift its focus

Zimbabwe needs to strategically position itself so that it can secure less than a quarter of the total assets under management of the SWF so it can clear its public debt For Zimbabwe to attract FDI we have to approximate the quantity and value of our minerals that are still in the Earth’s crust and are yet to be extracted The Challenge so far in doing the above is lack of capital and it is not expected that our domestic Fiscus will be able to meet this cost in the near future. That having been said we can adopt method used by the diamond mining houses where the Government of Zimbabwe places on tender substantially large concessions to be offered to large Financial Institutions such as Multinational Banks, Sovereign Wealth Funds and large private equity funds. I am convinced these auction/tenders will be oversubscribed by bidders who are desperately seeking finite minerals. Due to the fact that bidders will be competing against some of the largest funding houses in the world it would be imperative that they submit aggressive tender offers in order to secure any chance of winning the concession. The Government of Zimbabwe will be able to build a database of these participants and in turn market other minerals to them in the future It is critical that Zimbabwe insists that all capital raising activities of natural resource be originated in Zimbabwe. Thus we must implement legislature that prevents companies to list on their Foreign exchanges when trying to raise funding for mining activities on the back of Zimbabwe minerals. We must ensure that these investing companies list on the Zimbabwe Stock Exchange or conversely a whole new Metal Exchange

A rapidly growing middle class in Africa and Asia will lead to a protracted & sustained demand on minerals. A paradigm shfit from rural to urban society vis-à-vis Infrastructure growth It is forecasted that the entire African Population will have access to Broadband by 2060 Source: African Development Bank

Introduction: Metal Exchange A metal exchange is an entity that provides services for mineral brokers and traders to trade minerals through future contracts. The metal exchange can facilitate physical delivery of the minerals The daily prices published by the metal exchange may be used as a pricing reference for industry The metal exchange offers those at all stages of the metals supply chain, including both buyers and sellers, the opportunity to hedge their material price risk, and therefore gain protection from future adverse price movements The metal exchange can build a cache of minerals which it can store in its own warehouses to provide transparency for buyers who wish to secure product The metal exchange will also ensure that minerals on the exchange meet a certain quality standards to ensure that buyers are not shortchanged The metal exchange provides the environment for trading and regulates the operation of the market.  It has a statutory requirement to ensure that business on its markets is conducted in an orderly manner, providing proper protection to investors It makes no sense for a country like Zimbabwe to only 5 mining counters on the Zimbabwe Stock Exchange while having over 70 Financial and Industrial counters. Zimbabwe needs to focus on its economic competitive advantage and that lies in minerals Source: London Metal Stock Exchange

The role and benefits of a Metal Exchange The metal exchange will provide a market where small and big mining companies will be a able to have closer access to mineral buyers and traders Raising capital for mining businesses Zimbabweans will have an alternative investment opportunity where they can allocate their finances and benefit from Futures Trading Mobilize savings for investments The mining companies will be able to leverage their future contracts to expand product lines, increase distribution channels and acquiring business assets Facilitate growth of the mining sector The fees and commissions accrued from these transactions will circulate through our local financial institutions Expansion of the national financial sector It is important to note there are no significant ore reserves in the UK yet there citizens benefit immensely from minerals from Africa and Latin America. It is time that local inhabitants, the sovereign owners of these minerals BENEFIT

Why Harare should establish a metal exchange Harare is centrally located and has several transportation channels including road, rail and air that can provide for the easy delivery of minerals to the metal exchange warehouse Harare has an International Airport where buyers who wish to view product can easily fly from their host countries The London Metal Exchange (LME) generated revenues of $46 Billion per business day in 2010. (Indeed the LME handles metal trades for the world but even if Zimbabwe was to generate just 1% that would be $0.46 Billion) The metal exchange will expose local small-scale miners to traders and buyers who have the capacity to raise working capital for mining operation The metal exchange will promote the creation of value addition processes in the mining activities, including the construction of smelters and washing plants The metal exchange will create jobs for miners, geologists, stockbrokers, laboratory technicians, transporters, bankers, equipment manufacturers, hoteliers Harare has a developed telecommunications infrastructure including fixed and cellular networks and a rapidly growing broadband network Zimbabwe has an advanced financial industry that is operating in US dollar economy and thus there will be no exchange rate risk and making transactions much more ‘clear-cut’

One of the key ways Zimbabwe can benefit from its minerals is by adding value to them also know as beneficiation Below is a simple calculation that estimates the value a chrome smelter can add to the nation (figures based on new Afrochine Smelter) It is difficult to give an exact figure but I WILL TRY. chrome ore currently sells at $120 per tonne (ex-Zim) . This smelter will produce approximately 350 tonnes of ferrochrome per day. The current price of ferrochrome (ex-Zim) is conservatively $600 per tonne this will give a total of $600 x 350 = $210 000 a day this will give an annual return of 210 000 x 365 = $76.65 Million dollars a year (Please note this is revenue not profit furthermore it is dependent upon the smelter operating at 100% capacity everyday throughout the year) This is as opposed to $120*350*365= 15.33 million which would have been secured as raw chrome export)- INDEED A PRINCELY SUM- but much less than ferrochrome In addition to the revenue generated from ferrochrome sales, the smelter will create jobs for the people directly operating the smelter. Further to that the creation of accommodation and other amenities will be initiated for the provision of the families The energy sector will also benefit as that will be one of the major inputs purchased to operate the smelter The transport sector will also benefit as chrome mines will transport their produce to the smelter and ferrochrome will have to be transported to the ports for export Initial cost outlay to construct smelter is circa $25 million

The minerals depicted below (gold, platinum, diamond, iron ore,chrome ore,coal) will be Zimbabwe’s panacea if administered properly The following slides will provide a special focus on platinum and its potential

Thank you for your undivided attention How is my time looking do I still have time to present a brief on platinum

Introduction: Platinum Platinum is generally non-reactive. It exhibits a remarkable resistance to corrosion, even at high temperatures, and as such is considered a noble metal Platinum is used in catalytic converters, laboratory equipment, electrical contacts and electrodes, platinum resistance thermometers, dentistry equipment, and jewelry. Because only a few hundred tonnes are produced annually, it is a scarce material, and is highly valuable and is a major precious metal commodity.  Platinum's resistance to wear and tarnish is well suited for making fine jewelry. Pure platinum is slightly harder than pure iron. The metal has an excellent resistance to corrosion and high temperature and has stable electrical properties. All of these characteristics have been used for industrial applications Of the 245 tonnes of platinum sold in 2010, 113 tonnes were used for vehicle emissions control devices (46%), 76 tonnes for jewelry (31%). The remaining 35.5 tonnes went to various other minor applications, such as investment, electrodes, anticancer drugs, oxygen sensors, spark plugs and turbine engine The most common use of platinum is as a catalyst in chemical reactions, many times as platinum black. It has been employed in this application since the early 19th century, when platinum powder was used to catalyze the ignition of hydrogen. Its most important application is in automobiles as catalytic converter, which allows the complete combustion of low concentrations of unburned hydrocarbons from the exhaust into carbon dioxide and water vapor. Platinum is also used in the petroleum industry as a catalyst in a number of separate processes Source: Wikipedia

Zimbabwe’s platinum reserves are located along the great dyke

Zimbabwe & Platinum Zimbabwe has the second largest known deposits of platinum in the world The majority of Zimbabwe’s platinum reserves are located in the great dyke Zimbabwe's oldest platinum mine is the Mimosa operation, located in the southern part of the Great Dyke on the Wedza Geological Complex. Ownership is currently split 50:50 between Impala Platinum and Aquarius Platinum Since 2002, output at Mimosa has gradually been expanded, and the mine - which has been among the lowest-cost platinum producers in the world - extracts around 100,000 oz of platinum annually. In 2011, The largest mine Zimplats (we will look in at depth in the following slides) produced about 185,000 oz of platinum at Ngezi from a series of underground "portals" (declines), and an expansion programme is underway which will see output rise to 270,000 oz of platinum annually A third platinum mine, Anglo American's Unki project, was commissioned in late 2010 and produced around 50,000 oz of platinum in 2011. The mine is designed to extract and process 120,000 tonnes of ore per month, which should yield around 70,000 oz of platinum annually at full capacity Source: Zimplats Website

Current world Platinum supply is failing to meet world platinum demand Current world Platinum supply is failing to meet world platinum demand. Zimbabwe is the third largest producer behind South Africa & Russia

The value of platinum per ounce has generally increased over the past decade

The largest players on world platinum market are generally members of the International Platinum Group Metals Association (1 of 2) The members of the IPA together employ nearly a quarter of a million people and have a turnover of over 40 billion US dollars per year Anglo American Platinum Limited The Anglo American Platinum group is the world's leading primary producer of platinum and accounts for about 40 per cent of the world’s newly mined production Anglo American Platinum's operations, including seven mines, three smelters, a base metals refinery and a precious metals refinery, are situated in the Mpumalanga, Limpopo and North West Provinces of South Africa. Anglo American Platinum is based in South Africa. BASF BASF Catalysts (formerly called Engelhard Corporation) is the world’s largest catalyst company. The company’s material services segment provides precious and base metal services to its customers, including sourcing, financing, logistics support, price quotes, recycling chemical solutions and risk management ISHIFUKU Founded in 1930 in Japan, Ishifuku refines, recovers and sells precious materials. The company deals with everything from raw materials containing precious metals to finished products UMICORE (FABRICATION) Umicore is a materials technology group. Its activities are centred on four business areas: Advanced Materials, Precious Metals Products and Catalysts, Precious Metals Services and Zinc Specialties The Umicore Group has industrial operations on all continents and serves a global customer base; it generated a turnover of EUR 6.93 billion in 2009 and currently employs some 13,720 people (as of December 2009). The company is based in Belgium

The largest players on world platinum market are generally members of the International Platinum Group Metals Association (2 of 2) Tanaka Kikinzoku International Tanaka Kikinzoku International K.K., part of the Tanaka Holdings Co. Ltd., manufactures, researches and develops precious metal industrial products and precious metals bullion. Tanaka Kikinzoku International K.K. exports and sells precious metal industrial products. The group is based in Japan. Krastvetmet Krastsvetmet is one of the leading refiners of PGMs as well as gold and silver. The company ranks first among the Russian refineries in terms of technology level and scientific development The company processes about 99% of platinum and palladium mined in Russia, practically 100% of PGMs, about 50% of gold and up to 60% of silver. Krastsvetmet is involved in the production of precious metals, precious metals chemical compounds, metalworking, jewellery as well as in analytical facilities he company is headquartered in Krasnoyarsk, in Siberia, Russia, and employs over 2,700 people Johnson Matthey Johnson Matthey is a speciality chemicals company with operations in over 30 countries and employs around 8,500 people worldwide Its principal activities include the manufacture of autocatalysts, heavy duty diesel catalysts and pollution control systems, catalysts and components for fuel cells, catalysts and technologies for chemical processes, fine chemicals, chemical catalysts and active pharmaceutical ingredients and the marketing, refining and fabrication of precious metals. Johnson Matthey is a FTSE 100 ranked company with a total revenue of £7.8 billion and profit before tax, amortisation of acquired intangibles and restructuring charges of £267.9 million in the financial year to 31st March 2009

Johnson Matthey and BASF are some of the largest producers of catalytic converters in the world today Definition : Catalytic Converters A catalytic converter is a device used to reduce the harmful emissions from an internal combustion engine (used in most modern day automobiles and vehicles). There is not enough oxygen available to oxidize the carbon fuel used in these engines completely into carbon dioxide and water, thus toxic by-products are produced. Catalytic converters are used in exhaust systems to provide a place for the oxidation and reduction of toxic by-products (like nitrogen oxides, carbon monoxides, and hydrocarbons) of fuel into less hazardous substances for the environment such as carbon dioxide, water vapor, and nitrogen gas. BASF is now the world's largest manufacturer of catalytic converters. BASF's Catalysts division, headquartered in Iselin, New Jersey, is the world’s leading supplier of environmental and process catalysts. The group employs more than 5,000, with over 30 manufacturing sites worldwide. The company is currently expanding its international activities with a particular focus on Asia. Between 1990 and 2005, the company invested €5.6 billion in Asia, for example in sites near Nanjing and Shanghai, Chinaand Mangalore in India. Johnson Matthey through its state-of-the-art manufacturing process, Precision Coating, applies measured doses of platinum group metals to the tightest tolerances achieved in the industry. Johnson Matthey is known as a pioneer in the field of emissions control, having made the world’s first autocatalysts in its Royston facility, and invented the innovative CRT® diesel particulate filter technology.

Port Elizabeth produces South Africa’s most catalytic converters Port Elizabeth produces South Africa’s most catalytic converters. Norton could follow suit Home of South Africa's motor vehicle industry, Port Elizabeth boasts most vehicle assembly plants, General Motors, Volkswagen, Ford, Continental Tyres and many more automotive companies. Most other industries in the NMMM are geared towards the motor vehicle industry, providing parts such as wiring harnesses, catalytic converters, batteries and tyres to the vehicle manufacturers BASF has a catalytic manufacturing plant in Port Elizabeth Engelhard South Africa completed the construction of its Catalytic Converter Factory in 2012 at a cost of R120 million (approx USD$12 million) The Port Elizabeth BASF business began producing automotive catalysts in September 1994 with seven employees who worked in leased space at the local Ford Engine Plant.  Validation of BASF’s Port Elizabeth plant was completed in January 1995, with two approved customers. Increased demand led to capacity expansions until December 2001, when the business moved to a new, larger site in Struanway, where a world-class facility was established. Today, BASF’s Port Elizabeth facility is equipped with state-of-the-art, high-speed, meter-charged coaters. This technologically advanced equipment is used to manufacture Diesel Oxidation Catalysts, Diesel Particulate Filters and Three-Way-Catalysts. Since inception, BASF’s Three-Way-Catalyst technology has, on a global basis, destroyed over one billion tons of HC, CO and NOx before these toxic exhaust gases reached the atmosphere. Source: BASF Website

Platinum Jewelry is booming in China Platinum has become a favorite metal for its polish, high quality and strength. What people may not know is that platinum, unlike other precious metals, doesn’t cast color onto the stones or diamonds it’s set with. It’s a great option for men's and women's wedding bands Demand for platinum in China has surged since 1995, especially among young urban women seeking the modern style that platinum jewellery represents, so that China is now easily the largest single market for platinum jewellery. In the last decade, demand has begun to grow in India.  China’s jewelry demand rose 16% in 2012, The world's biggest market for platinum jewellery consumed 1.95 million ounces last year, within sight of the 2009 all-time high of 2.08 million. Consumption was 1.680 million ounces in 2011. In 2011, platinum got more attention than gold from most jewellery buyers' in China, with prices predicted to go higher this year given the surging demand from citizens and from the autocatalyst sector