Softening metal prices weigh down Zimplats’ profitability

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Softening metal prices weigh down Zimplats’ profitability

Business Writer

HARARE – The country’s biggest platinum producer, Zimplats posted a 42 percent decline in profitability for the quarter to June 30, 2018 to $37 million from $64,5 million of the previous quarter due to softening metal prices obtained during the period.

Revenue for the period under review also decreased 13 percent because of a 10 percent decrease in the volume of 4E metal sold.

Net operating costs for the platinum miner increased seven percent compared to the previous quarter.

“The previous quarter’s net operating costs benefitted from the recognition of income of $9,8 million in respect of treasury bills received in settlement of interest on the $34 million Reserve Bank of Zimbabwe (RBZ) advance.

“This was partly offset by the impact of the decrease in sales volumes on cost of sales and selling expenses,” said the platinum miner.

Royalty and commission expenses for Zimplats during the period increased seven percent from the previous quarter due to higher royalty rates when the operating subsidiary migrated from a special mining lease to an ordinary mining lease from June 2018. This was partly offset by the decrease in revenue.

Cash cost per 4E ounce increased nine percent from the previous quarter mainly due to a 10 percent and five percent decrease in mining and processing production volumes respectively.

“This was in addition to a general increase in operating costs during the quarter. Net cash cost per 4E ounce increased by six percent from the previous quarter due to the nine percent increase in operating costs which was partly offset by the increase in by-product revenue per 4E ounce driven by the nickel price increase,” said Zimplats.

Gross revenue per ounce for the miner decreased three percent from the previous quarter due to decreases in platinum, palladium and gold prices.

Zimplats said its total payments to Government of Zimbabwe in direct and indirect taxes during the period increased to $60 million from the $17 million reported in the previous quarter.

The increase was largely as a result of the payment of additional profits tax for the year ended 30 June 2017 which was payable during the quarter.

On production, tonnes mined decreased 10 percent from the previous quarter and this was as a result of planned closure of the open-pit operation as Bimha Mine has now achieved design production capacity.

With Bimha Mine now at design capacity, the platinum miner is operating at Phase Two underground mine design capacity, which is approximately 6,2 million tonnes per year.

Tonnes milled decreased by five percent from the previous quarter due to planned mill reline shutdowns at both concentrators during the quarter. The 4E head grade was unchanged at 3,23 grammes per tonne  despite the closure of low-grade South Pit Mine due to the dilution from mining of underground workshops at Bimha Mine and faulting at Mupfuti Mine.

Zimplats said the furnace operated well during the quarter smelting 31 434 tonnes of concentrate, although this was down from the 34 165 tonnes smelted in the previous quarter.

“This decrease was largely due to a planned seven-day tap block inspection shutdown in May 2018. This shutdown is conducted once every six months.”

 Overall, 4E metal production in final product decreased six percent from the previous quarter in line with the decrease in the volume of ore milled.

Bimha Mine attained design production in April 2018. The north crusher and ore conveyancing system is targeted for completion in August 2018 while the south crusher and ore conveyancing system is scheduled for commissioning in May 2019.

A total of $66,2 million has been spent and $14,4 million has been committed as at June 30,  2018 against a budget of $101 million.

Zimplats said the development of Mupani Mine (the replacement for Ngwarati and Rukodzi mines) is ahead of schedule, targeting ore contact by August 2019 and full production in August 2025.

A total of $37,8 million had since been spent and $18,7 million committed for the project as at June 30,  2018 against an approved total project budget of $264 million.