Going for it in Zimbabwe

THE GREAT IRONY contained in Impala Platinum’s (Implats) 2010 annual report is that its two most profitable divisions are located in Zimbabwe. Despite the litany of social, political and economic disasters that have befallen that country over recent years, both its Zimplats and Mimosa operations have consistently delivered the goods.

For financial 2010, Zimplats reported a gross profit margin of 51,5%, while Mimosa’s gross profit margin was 48%. In South Africa, the group’s flagship Impala lease operations near Rustenburg made a margin of 37,2%, followed by Two Rivers at 27,5% and Impala Refining Services at 10%, while Marula just failed to break even. The report also shows 42% of Implats’s total resources of 225m oz of platinum at end-June were owned by Zimplats.

You don’t have to be a rocket scientist to work out the implications. Implats’s long-term future appears heavily dependent on Zimbabwe, which is why management has now opted to spend US$450m on the Phase 2 expansion of Zimplats, which will increase platinum production by 90 000oz to 270 000oz/year. This decision would appear to have been taken reluctantly due to the obvious risk factors: in particular, the fact Implats hasn’t yet nailed down its black empowerment requirements in terms of Zimbabwe’s indigenisation regulations.

Implats says it’s confident Zimplats’s proposals – which incorporate agreements concluded with the Zimbabwe government – will comply with the legislation. The report notes: “In the longer term, with the appropriate investment climate, Zimplats has reserves to sustain one million ounces of platinum production annually.”

A feasibility study is already under way into Phase 3 expansion.

Implats’s far less attractive alternative is to sink more hugely expensive, deep-level shaft systems in SA.