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Johannesburg - Zimplats CEO Alex Mhembere has warned that the company's "short-term viability and survival are under serious threat" because of the crunch in platinum group metal (pgm) prices.
In a company statement released on Friday morning he said that, at prevailing metal prices, Zimplats was not able to generate sufficient cash to meet its ongoing operational needs as well as complete the Ngezi phase one expansion project.
The platinum price of about $840 is about 34% below Zimplats' production cost of $1&nbpsp;269/ounces of platinum in matte reported at the end of June.
About $137m was spent on the Ngezi phase one expansion in the year to end-June and capital expenditure for the current financial year to June 09 was estimated at $191m, according to the Impala Platinum (Implats) 2008 annual report.
Implats is the largest shareholder in Zimplats, owning 86.9% of the equity.
Despite this, it seems Implats is not prepared to fund the remaining capex requirements because Mhembere said Zimplats would have to raise additional debt funding to meet the projected cash shortfall.
He said in the statement: "Efforts are currently under way to raise the additional funding from off-shore financiers, an exercise not without its risks. Without this external loan funding, Zimplats will not be able to complete the Ngezi phase one project as scheduled.
Drastic measures implemented
Mhembere could not be reached for comment on Friday morning. According to his secretary, he was in meetings.
The statement said drastic measures had been taken to contain costs and preserve cash, including shutting down the open cast mining operations and cancelling various capital projects other than Ngezi.
Despite this, Zimplats was expected to report a "significant loss and cash shortfall" for the six months to end-December and again for the year to end-June 2009, unless metal prices recovered.
Mhembere said the Ngezi project was at a critical stage of implementation and, once completed, would drop Zimplats' operating cost structure to the point where it could operate profitably even at prevailing pgm price levels.
According to the Implats annual report, the smelter at Zimplats had been refurbished while the new concentrator plant was scheduled for "cold commissioning" in November and "hot commissioning" in February.
Once completed, the expansion project will boost Zimplats' production to 180 000 oz of platinum annually compared to the current annual production level of about 95 000oz.
- Miningmx.com
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