Zim platinum miners grapple falling commodity prices

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PHILLIMON MHLANGA

Zimbabwe’s platinum miners are battling to ride over subdued commodity prices on the international market, and have to contend with a painful new reality of soaring costs and squeezed margins.

Some of the players, who spoke to Business Times this week, highlighted that the sub-sector was facing an uncertain future as metal prices were weakening, saying there is still a terrible prospect. This will make it difficult to continue operating.

Platinum prices on the international market have hit new lows of about $800 per ounce this week from about $1 100 per ounce in January last year, meaning sellers at several international metal exchanges, including the famous London Metal Exchange, have lost faith in the metal, resulting in prices falling to about $800 per ounce this week.

At its peak, platinum, reached its highest price early 2008 at $2 252 per ounce but after the collapse of Lehman Brothers, once United States’ fourth largest bank, in 2008, and the start of the global crisis, there was panic over the industrial outlook of metals such as platinum.

The fall in commodity prices comes at a time when Government has identified mining as the pillar of economic revival. Several experts said platinum prices were likely to fall further this year.

Zimbabwe has the world’s second largest proven platinum resources after South Africa, estimated at 2,8 billion tonnes of platinum group metals (PGMs) ore.

Three mines are engaged in the production of PGMs and associated metals from the Great Dyke. These are Zimbabwe Platinum Mines (Zimplats), Mimosa and Unki Platinum Mine.

Zimplats, a subsidiary of Impala Holdings Limited, is the largest platinum producer owning three underground mines with a fourth under development, two contractors at Ngezi as well as a concentrator and smelter, located at Selous, approximately 70 kilometres, south of Harare.

It sells white matte (a concentrate of metals), which primarily consists of platinum, palladium, rhodium, gold and nickel.

Zimplats head of corporate affairs, Busi Chindove, told Business Times that the falling commodity prices were beginning to be seriously felt, saying the company had been forced to take “drastic survival strategies”. She appeared to be saying if the fall continues, the company could face operational challenges.

“Zimplats is also not immune to the impact of decline in metal prices that have affected the mining industry,” Chindove said.

“Most of the metals that we mine (more than 10 in total) have been affected by low prices with platinum and nickel taking the brunt of the fall in prices. “We have had to put in place survival strategies that include stringent cost and management and focus on productivity,” She added.

Unki Platinum Mine general manager, Walter Nemasasi, referred Business Times to Johannesburgbased Mpumi Sithole, who is the media manager at the parent company, Anglo American Platinum saying he was out of the country.

Mpumi, however, said: “We are currently under close period therefore we are unable to comment on your questions.”

No official comment could be obtained from Mimosa Mining Company, which had not responded to written questions as earlier promised.

But, well placed mining industry sources said some players have already outlined their intentions to reduce their head count and warned shareholders to expect a drastic fall in basic and headline earnings.

The crisis confronting platinum mines has been compounded by a slowdown in Chinese consumption, wreaking havoc in the sector. Chinabis the world’s biggest consumer of minerals and metals.

The Asian giant’s slowdown, coupled by weak economic recovery in Europe and sluggish growth in the United States, has severely undermined demand for commodities and affected prices. About a decade ago, China’s economy was growing at more than 10 percent annually and the Asian giant was a very hungry consumer of raw materials.

Miners around the world would jostle to meet demand. This created a “super-cycle” in commodities prices, but now China’s growth has moderated to around 6,5 percent, and it’s expected to remain weak this year.

Analysts say the fall in prices is also a result of slowdown in the global car industry, which uses the metal in catalytic converters