Zimplats refinery plan takes the heat off

Zimplats was unlikely to be affected by a new levy on unrefined platinum exports, the Zimbabwe unit of Impala Platinum (Implats) confirmed this week, with the Chamber of Mines of Zimbabwe saying no South African company had yet been affected by the tax.

Other South African platinum groups operating in Zimbabwe include Aquarius Platinum, which owns Mimosa jointly with Implats, and Anglo American Platinum, which operates the Unki mine.

Zimbabwe's government said this year that it would implement a 15% tax on exports of unbeneficiated platinum to try to force platinum mines to build a refinery in the country.

Queried on implementation of the levy , Mines and Mining Development Minister Walter Chidhakwa told Business Times on Thursday that he did not know "because that [implementation] is now for the ministry of finance".

Finance Minister Patrick Chinamasa could not be reached for comment and other officials referred queries to him.

President Robert Mugabe wants the platinum producers to build a refinery in Zimbabwe in double-quick time.

Zimplats is refurbishing an old refining facility at its Selous complex, which it aims to commission in July next year.

Sources at Zimplats told Business Times this week that the company was unlikely to be affected by the levy as it had "put forward a plan for building" its refinery.

The plan largely met government expectations although it was now demanding to see action, they said.

Implats spokesman Johan Theron confirmed this, saying Zimplats would be exempt from the levy.

This could leave Mimosa and Unki out in the cold although officials said the government would be pacified if Implats successfully completed refurbishment of its facility, which would cater for feed from other producers at a later stage.

"Zimplats smelts all their concentrate and produces smelter pellets, and as such we have been advised that we will not be impacted by current provisions," Theron said.

On Thursday Zimplats reported a 10% increase in revenue to $110-million (R1.3-billion) in the March quarter compared with the previous quarter. However, revenue dropped by 20% year on year.

Operating profit after royalties fell 81% to $6.8-million. However, the company said a recent high court of Zimbabwe ruling means between 2004 and 2014 Zimplats overpaid royalties.

Mimosa's managing director, Winston Chitando, and the company's spokesman, Munyaradzi Hwengwere, have refused to respond to detailed questions on 15% tax and other issues since November last year.

However, sources at the company said on Thursday that it was banking on a long-term plan by Zimplats to expand its upgraded refinery to treat its platinum ore.

As things stand currently, the company could be affected if the levy was to be implemented, the sources said.

"We do not have plans of our own and that is why not much is being said from this end. But we are banking on the Zimplats plant because Implats has an interest in Mimosa, so in the long term, Zimplats will be able to treat our feed," said an official at Mimosa, who did not want to be named.

Other mining companies in Zimbabwe referred further questions on the refinery issue to the chamber of mines.

"As far as we are concerned, the ball is in the government's court," Chamber of Mines of Zimbabwe CEO Isaac Kwesu said. "We have not received any communication from the platinum companies that they have been affected."

Proposed new levies have created uncertainty in the Zimbabwean mining industry.

Rio Tinto said last week that diamond output at Murowa slid by 61% in the quarter to March due to "a decision to reduce production rates pending confirmation that a new 15% export tax did not apply".

However, Reuters reported on Thursday that Zimbabwe had temporarily suspended the 15% tax on diamond sales, citing a drop in production and low global gem prices, according to correspondence to the International Monetary Fund (IMF) from the finance minister and central bank governor.

Diamond mining companies were ordered in October last year to deduct a 15% tax from gross sales of diamonds, backdated to April last year.

In a letter to the IMF dated April 17, Chinamasa and Reserve Bank of Zimbabwe governor John Mangudya said the decision to suspend the tax was part of efforts to improve the viability of the mining industry.

Diamond producers criticised the export levy last year, saying it would choke a sector hit by weaker prices.

"We have temporarily suspended the collection of the special dividend on diamond sales on the back of the drop in production and adverse price developments," said the letter from Zimbabwe's treasury and central bank, which was published on the IMF website.

Zimbabwe is believed to hold 25% of the world's reserves of opencast extractable diamonds, with the Marange fields in the east of the country its major diamond source.