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Storm could be over for Zimplats

Aug 31 2016 16:33
Memory Mataranyika

Harare – The storm could be over for Impala Platinum’s [JSE:IMP] unit in Zimbabwe as Zimplats on Wednesday reported a massive swing back to $7m profit following a $74.3m loss in 2015.

Zimplats is the biggest mining company in Zimbabwe and has just completed a feasibility study for a new furnace. It is also working on a base metal refinery and will deploy production teams to the collapsed Bimha mine in September this year.

“We had headwinds which we could not do anything about (from suppressed metal prices) in the previous financial year. But we had to survive the storm,” Zimplats CEO Alex Mhembere said on Wednesday.

In order to survive the turbulent market, which was worsened by a constraining environment in Zimbabwe, Zimplats reduced salaries for management and employees, negotiated for low prices with suppliers and adopted production efficiencies.

Zimplats posted revenue of $471m for the year to the end of June 2016, translating to a profit before tax of $29m. The company paid an income tax of $22m, down from $130m in 2015.

Zimplats had two tax disputes against the state revenue collector Zimra in 2015 and it won one and lost one, hence the high income tax figure. It is also engaging the government on the takeover of its 27 000 hectares of land claims. The issue is before the courts.

“We have survived the storm and now look forward to a better future,” added Mhembere.

In the full year period to June, Zimplats produced 290 000 ounces of platinum, having ramped up mine production by 26% to 6.6 million tonnes. This was despite losing production owing to the collapse of the Bimha mine, its biggest property in the country.

However, there are still headwinds emanating from the Zimbabwean economic environment. Other mining groups with operations in Zimbabwe include Anglo American Platinum [JSE:AMS] and Sibanye Gold [JSE:SGL] and executives say they are now also limiting capital projects.

“The Base Metal Refinery project has been delayed as a result of a cash squeeze. Studies for a new furnace have now been completed. You will remember numerous blasts we have had in the past. We are building a new one,” explained Mhembere.

Mining companies will now be expected to list on the local stock exchange in line with a new mining legislation, while the government still requires mining groups to build refineries in the country.

Impala Platinum, which is the world’s second largest miner of platinum, also jointly owns the Mimosa mine in Zimbabwe together with Sibanye Gold.

Mimosa has changed its expansion strategy after announcing that it will now undertake reef development instead of sinking a new shaft.

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