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Harare - Low platinum prices and a loss for the six months to end-December 31 have forced Zimplats, owned by Impala Platinum [JSE:IMP], to cut capital expenditure for the year to June 30 2016.
Speaking at a briefing for analysts and media on Wednesday, Zimplats CEO Alex Mhembere said the company has reduced its capital expenditure by US$90m, or 54% of the budget, to conserve cash.
“The current cash constraints and low platinum prices have forced us to delay some of our projects as we are focusing on conserving our cash resources,” Mhembere told Fin24 soon after the briefing.
During the briefing Mhembere said the company had embarked on several cost-cutting measures in an effort to ride out what he called a “perfect storm threatening the survival of the whole platinum mining sector”.
“One of the decisions we have taken is to ask our suppliers to reduce their prices,” said Mhembere, before adding that the miner also looked at other methods of rationalising labour.
Salary drop for managers
“We have also reduced salaries of our managers by an average 2.5% while salaries of executive managers were reduced by approximately 15%,” said Mhembere, adding that the company has also frozen labour recruitment.
The decision to cut both capex and costs comes at a time when Zimplats has recorded a 12% decline in revenue for the six months to end-December to $204.4m, from $233.5m in the prior comparative year.
Financial director Stewart Mangoma said the drop in revenue was due to the net effect of lower metal prices.
“We had a very good year in terms of our operations as we recorded a 30% improvement in ore mined, but this was weighed down by low prices,” said Mangoma.
Platinum prices came down by 42% from July 2015 to December 2015.
Mangoma said this resulted in gross profit coming down by 74% to $18.7m, while gross profit margins also dropped significantly to 9% from 30%.
