Prospect gets 5-year tax break 

Source: Prospect gets 5-year tax break | The Herald December 10, 2019

Prospect gets 5-year tax breakSam Hosack

Business Reporter
Prospect Resources, which is developing a lithium mine in the Goromonzi area, will be exempt from paying export tax on unprocessed lithium from its planned Arcadia Mine for five years, the company announced last week.

Managing director Sam Hosack said the decision by the Ministry of Finance and Economic Development to exempt the miner from paying export levy, shows the Zimbabwean Government is supportive of lithium mining in the country and is focused on attracting foreign investment into the country.

Prospect plans to start development at Arcadia Mine in 2020, and the company says this incentive will materially lift Arcadia’s project economics and will accelerate payback of project finance.

“The development of beneficiation facilities requires time for feasibility studies, mobilisation of resources and construction. In this regard, The Zimbabwean Treasury has approved the exemption from the export tax of un-beneficiated lithium originating from a new mine for a period of five years from the date of commencement of mining operations,” the company said.

“This is further confirmation that the Government of Zimbabwe is supportive of Arcadia and is focused on attracting foreign investment into the country. This incentive will materially lift Arcadia’s project economics and will accelerate payback of project finance,” Mr Hosack said.

“Our previously announced DFS and updates have all applied a 5 percent tax on un-beneficiated lithium to products sold. Removing the 5 percent tax for the first five years of production will reduce operating costs per tonne, increase profitability and lift the projects Net Present Value (NPV). Further details will be provided in due course.”

Prospect is already operating under a special economic zone (SEZ) status which grants the project generous tax breaks and other concessions.

“SEZ status at Arcadia provides Prospect with an extensive list of benefits that includes; tax relief and exemptions and the ability to hold and operate foreign currency accounts, as well as exemptions and reductions of costs and trade barriers associated with the import of raw materials and capital goods through to the exportation of the concentrates,” Prospect said back in February 2019.

With a SEZ status, Prospect said it will have greater abilities to hold and transact in foreign currency something which simplifies the miner’s ability to make payments to and from suppliers and customers, as well as providing potential financiers confidence that the company can manage its currency freely to meet its operational and capital management requirements.

In November, the lithium miner announced a significant increase in the ore reserve estimate at Arcadia, which further extends life of mine and a pathway to updated project economics.

The upgraded ore reserve of 37,4mt, which represents a 39 percent increase on the ore reserve announced in December 2017, incorporates updated pricing provided by Benchmark Minerals Intelligence following the completion of the low iron petalite market assessment in July 2019 and updated petalite recovery in line with recent test work developments.

Mr Hosack said the “incredible result” confirms Arcadia as a globally unique and significant lithium deposit to supply the glass and ceramics market with technical grade ultra-low iron petalite.

“We see the battery market as a key driver of lithium demand growth but remain focused on the glass and ceramics market where Arcadia seeks to become a significant, consistent and reliable high-quality supplier and access the premium prices available in this market”.

Prospect Resources Limited is an African focused mining company listed in Australia. Its flagship project is the Arcadia Lithium Project located on the outskirts of Harare in Zimbabwe.