MINING: Zimplats culls 25 bosses

Falling commodity prices have seriously affected mining companies

Falling commodity prices have seriously affected mining companies

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Zimplats will cull 25 senior managers to contain costs as plummeting commodity prices on the international market and a new 15 percent tax on the export of platinum ore takes its toll, it has been learnt.

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By shedding the senior managers, whose packages gobble up a substantial chunk of the platinum miner’s revenues, Zimplats hopes to make cost savings that will allow it to sustain operations.

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Last week, Zimplats — which is listed on the Australia Stock Exchange and employs close to 5 000 workers on permanent and contract bases — said it had opted to wield the axe on senior managers in order to spare lower level employees.

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Zimplats head of corporate affairs Ms Busi Chindove said the platinum mine had been facing challenges over the past nine months as the operating environment continued to be challenging, particularly after the collapse of Bimha Mine in 2014.

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“The company is facing a severe liquidity crisis that has been precipitated by a prolonged depression of metal prices, the impact of reduced production volumes.

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“As stated in the company’s half-year results, management embarked on a survival strategy that anchors on cost containment across the entire value chain, productivity and efficiency improvement, and cash conservation.

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“Labour is the single biggest cost line item in the company’s cost structure and has a bearing on both productivity and efficiencies. Taking cognisance of this fact, one of the strategic cost-containment initiatives implemented by management is a labour rationalisation exercise on the back of a review of the company’s top structure.

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“Following this review, 25 positions (grades CH+) were identified for retrenchment. Engagement with the affected individuals is underway. The necessary regulatory approvals will be sought prior to implementation and the exercise will not affect NEC employees.

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“Other stringent cost-control measures have also been implemented including review and rescheduling of capital expenditure,” said Ms Chindove.

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Commodity prices on the international market have been weakening on a strong dollar, a supply glut and softening growth in China, the world’s largest consumer of industrial metals.

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Iron ore led the fall in the first three months of 2015, dropping to US$51 per tonne, the lowest in the post-2007 US-induced financial crisis.

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Global energy experts also forecast that the demand for oil is likely to remain flat due to limited available storage.

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But, most tellingly, platinum prices — at US$1 143 per ounce — have dropped by 5,4 percent in the first quarter of 2015 from a quarter earlier.

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The metal has traded at the lowest price since July 2009. Last year platinum prices fell by 14,4 percent. Platinum is a rare metal that is costly to mine and highly valued across many industries. It is believed that despite supply concerns, slow growth in both China and Europe is affecting the platinum market.

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Investment demand also continues to slacken. There is concern that the 15 percent platinum tax, which came into being through the Finance Bill published on February 9, is weighing on producers.

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Mimosa Platinum Mine, jointly owned by South Africa’s Aquarius and Implats, warned earlier this year that the new tax was likely to affect its planned expansion project, a venture that was projected to create 200 new jobs and add US$25 million to the fiscus.

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Similarly, Anglo Platinum Mine (Amplats), parent company of Shurugwi-based Unki Platinum Mine, indicated that the export tax will cost the company US$10 million per year.

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Mining companies that have shed jobs so far include Mimosa, Unki and Bindura Nickel Corporation.

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Toronto Stock Exchange-listed gold miner New Dawn Mining Corporation has also employed cost-cutting measures.

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Government says hefty packages paid to senior managers are affecting industry competitiveness.

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Public Service, Labour and Social Welfare Minister Prisca Mupfumira recently said public and private entities were using wrong operating models in which more than 80 percent of their income is taken up by wage bills.

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“We are facing the same problem in Government where 80 percent of revenue collected goes to salaries. Under normal circumstances, our wage bill must take at least 30 percent of what we get so that the remaining 70 percent goes to service provision.

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“This is the same story at local authorities. Are we in business to pay salaries? That is the question you should ask yourself.

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“When you use 80 percent of what you get to pay workers, it means that the company is solely there for the workers not to make profit, which is wrong.

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“What is happening is that some workers are duplicating roles and we need to rationalise our operations to ensure efficient and effective use of our human resource,” she said.