Platinum sector seeks $7bn to optimise production

23 Nov, 2018 - 00:11 0 Views
Platinum sector seeks $7bn to optimise production Polite Kambamura

eBusiness Weekly

Kudzanai Sharara
The country’s platinum group of minerals (PGM) sector requires at least $7 billion in capital if it is to optimise production in the next five years, the latest industry survey report released earlier this week revealed.

According to State of the Mining Industry 2018 report, which was commissioned by the Chamber of Mines, miners in the PGM sector will require funding for both sustenance and production ramp up.

The survey, however, said if the industry is to fully optimise production, there is need to deal with several challenges, among others high operating costs, inadequate foreign exchange allocations, high power tariffs and a sub-optimal fiscal regime. Zimbabwe is currently going through serious price distortions that have seen the prices of inputs more than double and threatening the viability of mine houses.

For imported consumables, mines have also resorted to sourcing foreign currency from the parallel illegal market were forex is at a premium of upwards of 260 percent.

As a result, the PGM miners called for increased foreign exchange retention to 70 percent despite the latest increase to between 50 and 55 percent from 30 percent previously.

The Mines and Mining Development Ministry is also in agreement for increased retention levels with Deputy Minister Polite Kambamura calling on the Reserve Bank of Zimbabwe to increase foreign currency retention for minerals producers to 70 percent from the current levels if the country is to achieve its Transitional Stabilisation Programme targets.

“The Transitional Stabilisation Programme key performance indicators state that we need to re-open closed mines, reclaim and start working on dumps, we need to expand on existing mines, we need to open new mines, all these things need a chunk of foreign currency given the state of our economy currently.

“So we feel this amount (the retention ratio) needs to be further reviewed in phases to between 65 percent and 70 percent,” he said.

High power tariffs and suboptimal fiscal regime were also seen as having a negative impact on production.

Power tariffs for miners in the country range between 8, 6 US cents KWh and 12,86 US cents, which miners say is prohibitive and affect production. On the fiscal front, described as “suboptimal”, mining executives are of the view that the fiscal framework for the mining sector is unstable

Survey findings show that the respondents are pessimistic that the Government will implement consistent and predictable mining policies in 2019 as shown by an index of negative -6, compared to +2 for 2018.

The index scale ranges from -100 to +100, with the lowest score representing least level of confidence and the biggest score representing the highest. Other fiscal policy issues affecting optimality of the current fiscal framework include but are not limited to the non-deductibility of royalty. Miners recommended that royalty should be deductible as a tax expense in line with best practice in other mining jurisdictions.

There were also disgruntlements over the two percent tax on electronic money transfers, which the miners say “will be an additional burden to the mining industry, which is already operating in a punitive fiscal (tax) framework.”

The miners feel the cumulative impact of tax, (which is levied on transaction across the entire mining value chain and is not based on ability to pay), is more than 30 percent. The tax has resulted in price increases across the mining value chain, they say.

PGM miners also decried the beneficiation penalty that is levied on miners for failure to value add on raw minerals. Active miners in the sector expressed concern on the application of beneficiation penalties to compel mineral producers to beneficiate, arguing that the penalties are too high and will increase the tax burden on the mining sector.

The miners proposed the replacement of beneficiation taxes with beneficiation incentives as is the case in other mining jurisdictions. Chamber of Mines President, Batirai Manhando, was also in agreement, calling on Government to incentives miners instead of penalties.

The Platinum miners, recommended indefinite deferment of the export penalties in line with the platinum producers’ proposal and commitment to establish a centralised PGMs beneficiation facility in the country

The active PGM miners made up Zimplats, Mimosa, and Unki are, however, working on a road map to develop and establish a beneficiation facility in the country, which will be available for use by all Platinum Producers at the various levels of beneficiation.

All Platinum Producers will hold an equity stake in the company, as will the Reserve Bank of Zimbabwe.  “The facility will be the sole refiner and exporter of PGMs in the country and individual platinum producers will send their production to the facility for beneficiation.”

The Platinum Producers will carry out the necessary technical and commercial feasibility studies that will lead to the phased construction of the centralised beneficiation facility, starting with a smelter followed by a Base Metal Refinery (BMR) and finally a Precious Metal Refinery (PMR).

The facility is expected to be finalised by 2021.

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