Zimbabwe Annual Mining 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 MusekiwaCEO-Zimasco

Chairman-the Confederation of Ferrochrome Industries of Zimbabwe (CFeCrIZ)

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Disclaimer

This presentation is for information purposes only . Whilst the information contained herein hasbeen prepared in good faith, neither Zimasco (Private) Limited (the “Company”), or theConfederation 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 orwarranty in respect of the fairness, accuracy or completeness of the information or opinionscontained in this presentation and no responsibility or liability will be accepted in connection withthe same. The information contained herein is provided as at the date of this presentation and issubject to updating, completion, revision, verification and further amendment without notice. Thepresentation materials contain forward-looking statements in relation to the subject matter. By itsvery nature, such forward-looking information requires the Company and CFeCrIZ to makeassumptions that may not materialise or that may not be accurate. Such forward-lookingstatements involve known and unknown risks, uncertainties and other important factors beyond thecontrol of the Company and CFeCrIZ that could cause the actual performance or achievements to bematerially different from any future results, performance or achievements expressed or implied byinclusion of forecasts. Nothing in this presentation should be construed as a definitive forecast.

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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

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Chromium world flowchart-Source Roskill

Metallurgical gradechromite is predominantlysmelted to produceferrochrome used in steelalloys (predominantlystainless steel). Smallamounts of metallurgicalgrade chromite are usedin the production ofchromium chemicals,foundry sands andrefractories. End of lifematerial is recirculated asscrap, predominantly forstainless steel production

Overview of Zimbabwe Chrome Industry

72%

12%

5%

2%

1% 1%

7%

Global Distribution of Chromite Resources

RSA

Zimbabwe

Kazakhstan

Finland

India

Turkey

Rest of the World

Source: ICDA 2015

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Zimbabwe holds the world’s second largest chrome ore reserves, second only to South Africa. Global Resources estimated in excess of 12 billion metric tonnes (Source Roskill : Chromium Global Industry Markets and Outlook to 2018, 14th edition)

Chrome Ore• Chrome resources in Zimbabwe

occur in two forms which arepodiform & stratiform.

• Podiform deposits occur just offthe world famous geologicalfeature stretching acrossZimbabwe, namely the GreatDyke and are found in theMidlands and Mashava areas inthe South of the country.

• Stratiform deposits (seams) occurthroughout the length of theGreat Dyke from Guruve in theNorth down to Mberengwa in theSouth.

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Chrome ore- current status• From the limited exploration, the known

chrome ore resources occur approximately60% as lumpy (which is ideal for smelting) and40% as friable ores or fines.

• Mining of the lumpy ore is carried out in largepart by semi-mechanised medium sizedplayers and small scale miners from open pitoperations. The near future will see anincrease in underground mines as the open -pittable resource is dwindling.

• Friable ores and fines are currently processedvia medium sized concentrator washing plantswhere material is upgraded.

• 2018 chromite ore production totalled 1.4million tonnes, approximately 3.5% of globalproduction.

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Ferrochrome • The highest level of beneficiation of

chrome ore in Zimbabwe is productionof ferrochrome

• Due to the good quality of its chromeore resource, Zimbabwe largelyproduces Mid- High carbon ferrochrome(52-60% Cr). This is compared to chargechrome which is the main type offerrochrome produced in RSA where the%Cr is typically 47-52%.

• Smelting is energy intensive andelectricity constitutes the highestproduction cost component inZimbabwe

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Ferrochrome Current status • Zimbabwe currently has 14

ferrochrome operations mainlyconcentrated in the MidlandsProvince with the larger players(Zimasco, Afrochine) utilizing mediumsized furnaces and the smalleroperations using small furnaces.

• Production in 2018 totalled 365 kmt,which is around 2.5% of globaloutput.

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Beneficiation of Chrome in Zimbabwe

• Chromium has no substitute in stainlesssteel production, which is the back bonefor all global economic growth, hence it isa strategic global commodity.

• With an estimated 12% of the globalchromite resources and its chrome oreand ferrochrome production currentlycontributing less than 3% to globaloutput, the Zimbabwean chrome oreindustry has significant potential forgrowth

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Chrome Ore –Future Status

• The increased ferrochrome capacity on line will see increased chromite ore production in 2019 y-o-y of ~40% compared to 2018 (assumes adequate electricity supply).

• Future years will see chromite ore production increase in line with the growth of ferrochrome production.

• Chromite ore exports in 2018 totalled 800 kmt.

• Government’s thrust is towards value addition and beneficiation therefore future years will likely see a decrease in chromite ore exports as focus shifts to increasing ferrochrome production.

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594

891

1,358

1,901

2,367

2,874

3,141

-

500

1,000

1,500

2,000

2,500

3,000

3,500

2016 2017 2018 2019 2020 2021 2022

ZIMBABWE CHROMITE ORE PRODUCTION 2016-2022 ('000mt)

SOURCE MMCZ, CFeCrIZ

kmt

Ferrochrome –Future Status

• With new capacity already commissioned, output is forecast to increase by 15% in 2019 y-o-y to 419,000 mt.

• Resumption of operations at Zimbabwe Alloys on the back of refurbishments currently underway, coupled with expansion of production from Zimasco will see output ramping up in the coming years

• As part of the roadmap to Tsingshan’s stainless steel production in Zimbabwe by 2026, Afrochine, which is a subsidiary of Tsingshan (largest global stainless steel producer) will also expand its ferrochrome production going forward.

• The expansions will see Zimbabwe’s ferrochrome production capacity rise to almost one million tonnes (956 kmt) by 2022.

• The Zimbabwe ferrochrome Industry growth path dovetails with Vision 2030.

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164

309365

419

647

850

956

0

200

400

600

800

1000

1200

2016 2017 2018 2019 2020 2021 2022

ZIMBABWE FERROCHROME PRODUCTION 2016 -2022 ( '000mt)

SOURCE MMCZ & CFePIZ

kmt

Requirements for Growth of the Zimbabwe Chrome 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 gradesand tonnages and to locate new ore bodies

Innovation /new methods to tackle the mining of narrow seams on theGreat 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.

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ICDA Feedback

• Market Outlook • Due to uncertain global economic conditions arising from the trade wars esp.

between the USA and China, market expected to be bearish for the rest of 2019.• The supply side of both chrome ore and ferrochrome is expected to significantly

outstrip demand this year as the key global economies slow output due to the prevailing uncertainties.

• Stainless steel growth which, in previous years, has been typically around 5% is expected to slow to between 2-3% for 2019.

• The consumption of stainless steel scrap has increased especially in the developed markets like USA and Europe and is also growing in China due to increased availability. This results in reduced consumption of virgin ferrochrome.

• There is expectation that there will be some cut backs in production from the key ferrochrome producing nations of China and RSA in Q3 2019 and into Q4 2019, which should assist to rebalance the supply demand equation in 2020.

• Stainless steel growth forecast at between 2 - 3% p.a. for next the five years.

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Conclusion

Phenomenal Growth of the Zimbabwe Chrome Industry is possible

Low cost of production is key, the resource we have, the market is there

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Thank You

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