Implats stock tumbles as Zim mulls platinum exports ban

via Implats stock tumbles as Zim mulls platinum exports ban – DailyNews Live  15 JANUARY 2014

Platinum (Implats)’ share price has dropped 10 percent on the Johannesburg Stock Exchange in the past week following investor concerns over threatened beneficiation requirements by Zimbabwean government on its unit Zimplats.

This comes on the back of escalated pressure by Harare to have platinum miners construct a refinery in the country with President Robert Mugabe recently pushing for a ban of exports of the metal in raw form.

At the close of last week’s trade, despite little change in the South African stocks, gains were outweighed by losses by platinum producers amid low investor sentiment.

Implats — holding an 87 percent stake in Zimplats — together with other Zimbabwe-based platinum producers Aquarius Platinum Limited (Aquarius) and Anglo American Plc (Anglo)’s platinum units are under pressure from government despite raising concerns that they need to collectively and substantially increase output in order to produce the critical mass required before the establishment of sustainable refinery.

Implats corporate relations manager Alice Lourens said no deadline on beneficiation had been imposed by the Zimbabwe government.

“I don’t know where this story is coming from. We have received a nicely worded invitation to participate in discussions around beneficiation.”

An authoritative platinum industry source, speaking on condition of anonymity, disagrees, saying that political pressure is being applied but the situation is fluid with the Zimbabwean government as much over a barrel as Implats may be.

The reason is the desperate financial straits the local economy is in yet again.

There are also harsh financial, economic and technical realities in refining platinum group metals that Zimbabwe’s politicians cannot simply remove by decree.

The government is desperate for cash, which it is trying to raise through a raft of measures such as the proposed 15 percent export tax on unprocessed platinum.

It is also under pressure to show economic growth and job creation following last year’s elections in which President Robert Mugabe won by a landslide.

New sections in the Value Added Tax Act inserted after section 12B of Cap 23:12 take note of the collection of tax on exportation of unbenificiated platinum, determination of value thereof.

“Notwithstanding section 10 (1), tax at the rate of 15 per centum on the value of unbeneficiated platinum shall be levied on a supplier of such platinum for export from Zimbabwe,” reads part of the new inserted section.

For Implats — whose subsidiary, Zimplats, is the largest platinum group metals producer in Zimbabwe ? and its 50 percent stake in Mimosa Platinum, its Zimbabwean operations have repeatedly shown the group’s highest profit margins.

The other 50 percent in Mimosa is owned by Aquarius Platinum, while Anglo American Platinum (Amplats) operates the Unki mine in the country.

Zimbabwe’s platinum mines are low-cost, shallow, mechanised operations staffed by small but skilled workforces.

This compares with Implats’ deep, high-cost mines around Rustenburg in South Africa, staffed by huge numbers of unskilled and increasingly militant workers.

The Zimbabwe platinum output shipped to Implats’ refineries in South Africa for beneficiation is important for the economic efficiency of those refineries.

Implats wants to expand in Zimbabwe because it does not control the huge resources that are owned by Amplats in South Africa.

“Zimplats represents our blue sky potential,” Lourens said.

According to the PGMs producers, the country needs investment to the tune of $5,3 billion and stable mining policies if it is to boost platinum output and viably operate the refinery.

Impala, through Zimplats, operates the Ngezi Mine while it also runs Zvishavane-based Mimosa operation in a joint venture with Aquarius. Anglo owns Unki Mine.

Together, the miners were forecast to produce about 365 000 ounces of platinum last year and are targeting 500 000 ounces by 2015 which will be enough to sustain refinery operations.

The Platinum Producers Association of Zimbabwe (PPAZ) has said the country must have adequate power supply in order to fully realise the benefits of a platinum refinery.

But the country is currently facing a crippling power shortage, generating around 1 100 Megawatts (MW) against a peak and growing demand of approximately 2 200 MW.

Government’s ambitious plans to enforce local beneficiation of platinum have already been dealt a blow by China Machinery Engineering Company’s failure to raise funds to complete a $2 billion upgrade to the Hwange Power Station.

The indefinite delays to the expansion underscore the impracticality of the government’s efforts to force platinum producers to build a refinery in the country before the end of the year.

The Chinese company won the tender eight months ago but is yet to secure adequate funding for the project.

Imports are not adequate to cover the deficit.

Herbert Mashanyare, PPAZ’s chairperson, last year said that the critical requirement to spur establishment and operation of the platinum refinery — estimated to cost at least a billion dollars — is electricity.