Income tax rate change hits Zimplats

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Tawanda Musarurwa

HARARE – Zimbabwe Platinum Holdings (Zimplats)’s profit for the year to June 30, 2018 slid 94 percent to $2, 6 million from $45, 5 million in the prior comparable period.

During the period under review, the platinum giant’s deferred tax charge was significantly higher than the prior year because of the change of the operating subsidiary’s status from being a special mining lease (SML) holder to a mining lease (ML) holder.

The group said a deferred tax charge of approximately $95, 4 million was recognised in FY2018 arising from the change in income tax rate of 15, 45 percent under the SML tax regime to 25, 75 percent under the ML tax regime (inclusive of AIDS levy).

Resultantly profitability during the year was significantly depressed.

Revenue for the year increased by 14 percent from $512, 5 million in FY2017 to $582, 5 million despite a 2 percent decrease in 4E sales volumes from 555 892 ounces to 542 085 ounces.

Management attributed this to the increase in the average prices received for palladium, nickel, rhodium and copper which resulted in a 17 percent increase in gross revenue per platinum ounce from $1 868 to $2 184.

“In terms of the revenue, 14 percent up, we could have done much better if metal prices, particularly platinum, had continued to be firm,” said CEO Alex Mhembere.

Operating cost was down 5 percent to $1 290 per platinum ounce.

Profit before tax rose 64 percent to $166 million, but the group incurred a once-off tax expense of $163, 3 million, which knocked down profitability for the period.

The income tax expense increased from $55, 8 million in FY2017 to $163, 3 million driven mainly by a $98, 1 million deferred tax charge.

Cash generated for the period amounted to $195 million.

With regards to production, ore milled reached 6 570 000 tonnes, which is above the company’s nameplate capacity of 6 200 000 tonnes.

Total platinum ounces produced and sold in FY2018 decreased from 281 069 ounces and 274 364 ounces in FY2017 to 270 717 ounces and 266 720 ounces respectively.

During the year under review, Zimplats spent a total $136 million in capital expenditure in its 2018 financial year as it seeks to bring the Bimha and Mupani mines into operation.

Zimplats is currently in the process of redeveloping Bimha Mine, which collapsed in 2014; and the development of the Mupani Mine is aimed at boosting total capacity going forward.

Mhembere said the platinum producer spent $29, 9 millon for the Bimha Mine redevelopment in the financial year ended June 30, 2018, pushing expenditure for the project to date to $66, 2 million.

The redevelopment project has a total budget of $101 million.

On the Mupani Mine development project, Mhembere said the company spent $28, 7 million in 2018, pushing total investment so far to $37, 8 million. A total of $264 million has been lined up for the project.

In other expenditure, Zimplats spent $31, 2 million on replacement of trackless mining machinery, and another $46, 2 million on routine stay-in-business capital projects during the period under review.

The board declared a dividend of $65 million, equating to 60,39 US cents per share.

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