via Electricity generation key to platinum refinery | The Financial Gazette by Shame Makoshori 5 Feb 2014
BILLIONS of dollars required to set up a local platinum refinery could go to waste if government, which has been pushing mines to fast-track the project, fails to assess the real implications of its political decision, analysts have warned.Government, cash-strapped and battling to increase revenues to fund operations, appears to have thrown away all caution, threatening platinum producers with massive penalties unless a refinery is put in place in two years.
Zimbabwe has to invest in additional power generation, for instance, before initiating construction of a platinum refinery, as current power shortages crippling industries are an indication of declining capacity.
Electricity generation should therefore be increased to support any planned project that guzzles power, say analysts.
The construction of a refinery in Zimbabwe would require additional power generation of between 100 and 150 megawatts, according to a note prepared by the Platinum Producers Association, whose membership includes Zimplats, the country’s largest platinum producer, as well as Mimosa Mining Company and Unki Platinum.
Basic infrastructure such as roads, dams, housing and other amenities would have to be built, while additional resources would have to be poured into the modification of existing facilities before rolling out refineries.
“There are power cuts in Zimbabwe, additional generation capacity must be in place,” said John Robertson, an independent economist.
Robertson said given the extent of the requirements, the tight deadlines imposed by government would be difficult to meet.
“They will not do it in three to four years,” he said.
“Platinum mines know that there is no need to build a refinery because they are charged small amounts to process in South Africa,” he said.
The process of extracting metals associated with Platinum Group Metals (PGMs) starts at mining, concentration, which is the crushing and flotation, smelting, Base Metal Refining (BMR), recovery of base metals such as nickel, copper, cobalt and precious metal refinery among others.
In Zimbabwe, only a few stages of the process are carried out, and semi-processed output is shipped to South Africa for refinery.
Debate on whether or not to set up a refinery has also revolved around the feasibility of the plant, given Zimbabwe’s history with refineries.
The country hosts one of Africa’s largest copper processing plants at Alaska, which has been lying idle since global copper prices slid in the 1990s, leading to the closure of Mhangura and other copper operations.
The Alaska plant, which was later used to process copper from southern African producers, remains closed even after massive recovery of the industry across the region, where Zimbabwe has failed to tap into existing opportunities to resume production.
Then there is the Empress Nickel Refinery, which is likely to lie idle for some time following the collapse of the country’s nickel mines, while Africa’s largest integrated steel production plant, the Zimbabwe Iron and Steel Company, has been inactive for many years.
A platinum refinery costing at least US$2 billion could fall into the same predicament, with the massive investments going down the drain if political decisions take precedence over business and economic consideration, analysts warned.
But government has been advocating value addition in Zimbabwe, warning that heavy taxes would be imposed on the exportation of semi processed platinum.
It would be difficult for Zimbabwe to attract the scope and scale of investment needed for the refinery, given a recent standoff between government and Zimplats, which drifted into a public spat after government shifted goal posts on initial agreements. One of the agreements related to Zimplats’ tax requirements, which the Zimbabwe Revenue Authority later ignored and proceeded to demand payment.
Will investors warm up to a deal that will guarantee them minority shareholding in compliance with the country’s tough empowerment laws even after pouring the entire capital?
“If government was to offer them 51 percent shareholding now before building the refinery, then they would go ahead,” said Robertson.
A note from the Platinum Producers Association said; “It definitely makes economic sense to value add our products. The benefit will be advantageous from downstream industries and savings from toll treatment fees”.
“It should be noted that currently there is no smelter or BMR which can accommodate the current PGM materials without expansion and or technical modification of any existing unit.”
“Facilities will be built not only for current production but for future requirements. The producers have submitted a detailed proposal to the Ministry of Mines and Mining Development for the establishment of these value addition units.”
Even within government, there appears to be diverse opinion to government’s current plan, with Mines and Mining Development Deputy Minister, Fred Moyo, a veteran mining administrator and former Hwange Colliery Company Limited managing director, indicating recently that the timeframes were unworkable.
“I am not sure if it will be possible to achieve that deadline since we are left with just one year,” he was quoted as saying.
“This depends on technology, funding availability, skills and as well as timing. We are producing around 400 000 ounces but setting up a refinery (for platinum mines) may cost a billion, US$2 billion, but this is dependent on our production levels,” he said.