Zimplats spent $38 million on expansion projects in the year to June 30, 2015 compared to $73 million in the previous year

Zimplats spent $38 million on expansion projects in the year to June 30, 2015 compared to $73 million in the previous year

Business Reporters
The country’s largest platinum producer, Zimplats recorded a $74,3 million loss after tax for the year ended June 30 2015, a 177 percent drop from $97,1 million for the previous year. This was after the company took a 314 percent hit in tax amounting to $130,5 million due to the impact of two court judgments.

“The High Court of Zimbabwe issued its judgment in the case involving a dispute between Zimbabwe Platinum Mines (Private) Limited and the Zimbabwe Revenue Authority (ZIMRA) over which mining royalty provisions are applicable to the operating subsidiary.

“The judge ruled that the royalty provisions in the operating subsidiary’s mining agreement take precedence over the royalty provisions set out in the Finance Act and that accordingly, the operating subsidiary is liable to pay royalties at the rate of 2,5 percent of the value of all minerals produced and not at the higher Finance Act rates. “The effect of the judgment was that the operating subsidiary overpaid royalties by $108 million in respect of the period between January 2004 and December 2014 ($95,8 million from January 2004 to June 2014).

In the other case Zimplats said: “The Special Court for Income Tax Appeals delivered its judgment in the case involving a dispute between the operating subsidiary and ZIMRA on the issue of whether income tax assessed losses are allowable deductions for purposes of calculating additional profits tax (APT). “The judge found that an assessed income tax loss carried forward from a previous year of assessment is not allowable as a deduction in computing APT. The effect of this judgment is that the operating subsidiary has an additional liability of $55,3 million for APT for the period from July 2004 to June 2014.”

Revenue for the period under review decreased by 29 percent to $408 million mainly due to a 20 percent reduction in platinum, palladium, rhodium and gold sales volumes, Zimplats, which is 87 percent owned by Impala Platinum Holdings said. Production of platinum group metals declined to 381 849 ounces from 477 905 ounces in the previous year.

Revenue per platinum ounce fell to $2 167 from $2 457, resulting in 12 percent fall in gross revenue. Cost of sales of $316 million was 5 percent lower than the previous year’s due to the decrease in sales volumes, which was partly offset by higher costs associated with underground roof support in bad ground areas. Administrative expenses for the year at $44,1 million were marginally higher than the $43,8 million reported in the previous year.

Operating cash cost per platinum ounce increased by 18 percent from $1 319 in the prior year to $1 551 mainly due to the impact of the lower production volumes on fixed costs. Net cash inflows from operating activities marginally decreased from $146,4 million in the prior year to $142,2 million, the company said.

The marginal decrease was due to the company’s tight cash preservation strategy in response to the decrease in sales volumes and metal prices and also due to the royalty overpayment refund. At year-end, the group had bank borrowings amounting to $82 million and a cash balance of $73,5 million. The board declared a final dividend of $13 million, equating to 12,08c per share for the period.

On capital projects, the company said The Ngezi Phase 2 expansion project implementation is progressing well with a total of $441 million of the project budget having been spent. “A strategic decision was taken to refurbish the mothballed base metal refinery at Solusi Metallurgical Complex to further beneficiate from the current final product of converter matte,” said Zimplats

“Feasibility studies for the refurbishment of the BMR were completed during the year. The BMR will produce a platinum group metals (PGM) cake, copper cathode and nickel sulphate. The PGM cake will still need to be processed further in the precious metal refinery (PMR) and this will continue to be done in South Africa.

“While the copper cathode will be sold directly to the final customer, the nickel sulphate will need to be processed further in a metalliser and this will be outsourced to other refineries in Zimbabwe.” Zimplats spent $38 million on expansion projects in the year compared to $73 million in the previous year.