Soft metal prices weigh on Zimplats 1H revenue
ZIMBABWE’S largest platinum producer, Zimplats, half-year revenue to December 31, 2023, at US$372,8 million, was 32 percent lower than the prior-year comparative period as average US dollar metal prices softened during the period.
Apart from its impact on Zimplats, a dip in platinum also has an impact on Zimbabwe's export revenue given that mining in general accounts for more than 75 percent of export earnings, while platinum comes only second after gold among the biggest export earners.
Zimbabwe is the world's third-largest producer of platinum, after South Africa and Russia while precious metal is a major source of tax revenue for the fiscus.
Zimplats group chief executive Mr Alex Mhembere, in the group's half-year financial report, said the operating environment for the period under review was characterised by softening metal prices, which affected the financial performance.
“In response, the company has instituted a number of survival strategies with stringent measures to contain costs and preserve cash.
“We remain focused, committed, and determined to ensure the overall success of the business.”
In addition, he said, the group’s focus on safety remained unwavering and will continue to invest in resources and technologies to ensure the achievement of the company's zero-harm goal.
During the period under review, gross revenue per 6E (6 elements) ounce sold declined by 38 percent to US$1 164 from US$1 870.
Sales volumes of 6E ounces were 10 percent higher at 320 196 ounces compared to 291 751 in the prior period, while the cost of sales at US$342 million was 8 percent higher than the same period last year’s US$315,6 million.
“Consequently, gross profit margin was 8 percent, a 34 percent reduction from 42 percent achieved in the same period last year, mainly due to the impact of a higher than budget operating cost per 6E ounce in the current period,” said
Mr Mhembere.
The cash operating cost per 6E ounce produced at US$829 increased by 1 percent from the US$822 reported in the same period last year, mainly driven by local inflation and an increase in labour headcount due to the introduction of the third concentrator plant and pillar reclamation.
“Resultantly, profit before income tax for the period at US$14,2 million was 94 percent lower than US$221,5 million recorded in the same period last year.”
The group’s income tax for the half-year at US$23 million was below the prior-year comparative period, mainly due to lower profit before tax.
However, Mr Mhembere said this was largely offset by the increase in deferred tax expenses following the change in corporate income tax rate from 24,72 percent to 25,75 percent, which resulted in a loss after tax for the period of US$8,8 million compared to a profit after tax of US$159,6 million achieved in the same period last year.
The group generated net cash inflows from operating activities amounting to US$70,1 million and paid dividends of US$100 million.
It made a drawdown from the Standard Bank of South Africa borrowing base facility of US$35 million during the six months to December 2023.
In terms of operations, ore mined during the half-year increased by 5 percent to 4 million tonnes from 3,8 million tonnes for the same period last year.
Mr Mhembere said this was mainly due to pillar reclamation at Rukodzi Mine in addition to Mupani Mine production output, which has increased from 1,1 million tonnes per annum (Mtpa) to 1,4 Mtpa.
Tonnes milled, at 3.9 million tonnes, increased by 6.4 percent compared to the same period last year, mainly due to Third Concentrator Plant mill volume optimisation.
Six elements (platinum, palladium, rhodium, gold, ruthenium, and iridium) (6E) mill head grade at 3,34 g/t was marginally lower compared to 3,39 g/t achieved in the same period last year due to the increased contribution of ore from lower-grade mines.
6E production increased by 9 percent to 327 810 ounces from 300 738 ounces in the same period last year, mainly due to the increase in the milled tonnage.
Mr Mhembere said the group’s capital projects to maintain current production levels through mine replacements and upgrades are ongoing according to plan.
He said the development and upgrade of Mupani Mine, the replacement for Ngwarati, Rukodzi, and part of Mupfuti Mine, are on schedule.
Mupani Mine targets a production capacity of 3,6 million tonnes per year in August 2028, and a total of US$291 million had been spent on this project as of December 31, 2023, against an approved project budget of US$386 million.
“The upgrading of Bimha Mine is progressing well, having achieved a nominal production capacity of 3.1 million tonnes per year.
“The mine upgrade is part of the replacement of production capacity at Mupfuti Mine, which is scheduled for depletion in 2027,” said Mhembere.
A total of US$77 million had been spent on this project as of December 31, 2023, against an approved project budget of US$82 million.
Mr Mhembere said the smelter expansion project implementation continued with on-site construction and delivery of manufactured equipment in the half-year under review.
The project targets a capacity of 380 000 tonnes of concentrates, and the sulphur dioxide (SO2) abatement project has progressed well, with significant offsite equipment manufacturing being completed.
On the refurbishment of the mothballed base metals refinery (BMR) at SMC, he said the project progressed well with a focus on early onsite construction activities, procurement of long lead equipment, and metallurgical test work.
The BMR targets a capacity of 5 200 tonnes of nickel equivalent to current production volumes, and as of December 31, 2023, US$18.5 million had been spent on the project, against a project budget of US$190 million.