Zimbabwe’s biggest lithium mine, Bikita Minerals, has ordered local contractors to stop providing services due to low global lithium prices and the Zimbabwe Gold (ZiG) retention exchange rate which has made a bad economic situation worse for the Chinese Bikita Minerals owners, Sinomine Resource Group.
As reported the 75:25 ZiG retention exchange rate means that miners receive 75% of their payments in hard currency, with the rest in ZiG at a command rate set by the regime.
As critics points out this means the Zimbabwean Government takes 25% of the hard currency earned by each miner and gives them the worthless ZiG in exchange.
Local contractors at Bikita Minerals were requested to stop at the end of September, however, Chinese contractors will continue working at the mine.
Bikita Minerals holds Zimbabwe’s largest lithium deposit.
Lithium prices have dropped from an all-time high of US$4,500 per kilo tonne to US$750 per kilo tonne as of 9 September.
The Chinese are asserting that when factoring in the infamous 75:25 forex retention scheme, the effective USD price being realised is below US$750 per kilo tonne.
The ZiG has been a source of significant economic instability in Zimbabwe, with its recent devaluation and adjustment in response to market pressures making the uncertainty worse.
Renowned Zimbabwean investigative journalist Hopewell Chin’ono notes:-
This situation is likely to have far reaching implications for businesses, consumers, and the overall stability of the Zimbabwean economy.
Bikita Minerals is a major player in Zimbabwe’s mining industry, being the largest lithium mine in the country.
The privately owned company holds an estimated 11 million tonnes of lithium deposits, considered the world’s largest-known deposit.
The mine is located in Masvingo Province in southern Zimbabwe.
The tragedy in Zimbabwe is that the ordinary Zimbabwean is too busy trying to survive daily hunger to understand what this means to them in Chirambahuyo and Mahusekwa.
The ordinary person in Zimbabwe will be affected through job losses, as local contractors are laid off, the affected workers and their families will face financial uncertainty and economic ruin.
This will also mean reduced economic activity with the cessation of services provided by local contractors leading to a decline in economic activity in Zimbabwe.
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This will impact businesses beyond mining that relied on these contractors or the mine’s operations, leading to a ripple effect throughout the local economy and beyond.
The devaluation of the ZIG, as I mentioned earlier in the context of the 75:25 forex retention scheme, will lead to increased prices for imported goods and services.
This will erode the purchasing power of ordinary citizens, making it more challenging to afford basic necessities of life like food and healthcare which has collapsed in the public sector.
The broader economic consequences of the situation at Bikita Minerals and the currency devaluation will contribute to an overall sense of economic instability and uncertainty in Zimbabwe.
This will impact consumer confidence, investment decisions, and long term economic growth.
The Zimbabwean tyrant and corrupt dictator whose family is heavily invested in lithium exports seems at sea with these issues as the ship sinks as if it doesn’t have a captain sliding from side to side economically.
