eBusiness Weekly
Kudzanai Sharara
Platinum miner Zimplats says it is unfazed by significant headwinds that have resulted in downward pressure on metal prices which have adversely impacted revenues and profit margins.
Platinum prices have been on a downward trend since 2011 due to a number of factors that include surplus arising from abundant production from the era of high prices on the back of lower demand from both emerging markets and advanced economies and lower than normal auto industry demand.
Used mainly in vehicles’ emissions-reducing catalytic converters and in jewellery, platinum has slumped nearly 18 percent from a one-year high reached in January, also partly due to a stronger dollar, but mostly oversupply.
Johnson Matthey predicts for this year a larger oversupply of 316 000 ounces, the biggest since 2011.
Another negative is the rising US currency, which has made dollar-priced platinum more expensive for buyers using other currencies and therefore could undermine demand. Zimplats receives revenue for its metal sales in US dollars.
Platinum is also caught in broader turmoil triggered by fears of a trade war between the United States and its major trading partners, with investors calculating that higher tariffs could raise the cost of vehicles and slow global economic growth.
Last week the metal crashed to $793 an ounce, its lowest since December 2008 and its weakest ever relative to gold, which is trading near $1 250 an ounce. Platinum later recovered slightly to around $822 as of Tuesday.
In emailed responses to Business Weekly, Zimplats said despite the low platinum price, it has managed to sustain its operations through adoption of various survival strategies.
“As the company embraces the new normal of low metal prices, its short- term strategy will continue to focus on business optimisation through a host of measures.
“In the past few years, we have successfully sustained our operations by adopting survival strategies such as enhancing production efficiencies to achieve production volumes, energy efficiency initiatives to reduce cost of power, and stringent management of costs, cash resources and capital expenditure,” said Zimplats.
“We are currently producing to design capacity, going forward we will continuously monitor metal prices and their impact on the business operations with a focus on managing our input costs,” Zimplats said.
In addition to low commodity prices Zimplats also noted that it is struggling to meet its import requirements as it has to surrender the bulk of its export proceeds to the Reserve Bank of Zimbabwe.
“While we receive revenue for our metal sales in US dollar the strengthening of the dollar has a negative effect when we take into account the fact that we surrender 65 percent of our US dollar export earnings to the RBZ and receive our export incentive in bond notes when most of our inputs have to be purchased in US dollar.”
Despite the low prices, the miner also said it is going ahead with its expansion plans including the development of a new mine.
“In terms of long term strategy, the company remains focused on growth plans.
“(We have) continued with (our) investment programme. In FY2018, Zimplats focused on major capital projects, which included investing in trackless mining machinery, the development of Mupani Mine and the redevelopment of Bimha Mine, which is now back at full production as of 30 April 2018. Going forward progress on projects will be matched with available resources.”
Currently, the miner is producing from one open pit mine and four underground mines. The four underground mines are operating at full production while a fifth replacement mine is being constructed to replace two of the older mines nearing the end of their available ore reserves.
The development of the 2,2 million tonnes per annum Mupani Mine is progressing well with ore contact expected by May 2020 and full production from August 2025. The mine is being developed to replace Rukodzi and Ngwarati mines, which will be depleted in FY2022 and FY2025 respectively.
Zimplats is currently operating at its full name-plate design capacity (6,2 million tonnes per annum), producing in excess of 500 000 ounces PGM (4E) per annum, with associated base metals (copper and nickel). It also produces 10 other associated minor metals.
Production from the mining operations is processed by three concentrator plants (one at Selous and two at Ngezi), before the flotation concentrate is further refined at the Selous Metallurgical Complex, where the smelter and refinery is located.
