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Zimbabwe's Mimosa to expand
Brendan Ryan
Posted: Tue, 09 Jan 2007

[miningmx.com] --AQUARIUS Platinum (Aquarius) and Impala Platinum (Implats) are to spend US$23,2m on a fifth expansion of their jointly-owned Mimosa Platinum in Zimbabwe which is the most profitable mine in either group.

The "Wedza Phase V" expansion will lift Mimosa's annual production from the current 160,000oz of platinum group metals (pgm) - of which 85,000oz is platinum - to 195,000oz of pgm of which 100,000oz will be platinum.

According to Aquarius, Mimosa reported a gross cash margin of 76% in the 2006 September quarter compared with 66% for the group's Everest mine; 65% for Kroondal and 43% for Marikana.

Implats does not publish quarterly results. The annual report for the year to June showed a gross margin of 42% for the long-established Impala lease operations at Rustenburg and an overall group gross margin of 34%.
a more cautious view
Implats executive director Les Paton attributed Mimosa's profitability to the fact that it is a fully-mechanised underground operation unlike Zimbabwe sister mine Zimplats which gets some 50% of its ore from opencast operations.

He said the higher operating costs at Zimplats were the result of rising fuel costs as well as the fact that all the ore has to be trucked 70kms to the milling plant.

"That's why Zimplats will be changed to a fully-underground mining operation within 18 months, " Paton added.

The expansion at Mimosa involves the installation of a new mill which will increase concentrator capacity from 150,000 tons milled per month to 175,000 tons milled per month.

Paton said the mill is a second hand one which was bought in the United States. It will be shipped to South Africa, refurbished and then hauled up to Zimbabwe to be installed. Plans are to complete the installation by June this year with full production to be reached from July.

Paton added the additional tonnage will be sourced from the existing South Hill mining infrastructure. While additional mechanised mining equipment will be needed there will be no requirement for extra mining infrastructure such as new decline shafts.

The capital expenditure will be funded from retained cash flows. Mimosa sells its metal in concentrate form to Impala Refining Services in South Africa which pays Mimosa in US dollars offshore.
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Mimosa is allowed to keep much of those funds offshore to meet financial obligations such as dividend payments; long-term capital requirements; debt repayments and on-going working capital repayments.

Funds brought into Zimbabwe to meet operating expenses are changed into Zimbabwe dollars through the Zimbabwe Reserve Bank at "varying exchange rates," Paton said.

He described the operating situation in Zimbabwe as "manageable" but added there were problems with the exchange rate from time to time.

The decision by Aquarius and Implats to expand the mine takes place against the background of continued uncertainty over the new legal dispensation being proposed for the mining industry in Zimbabwe.

"The phase V expansion to 175,000tpm on capex of $23.2m in today's statement compares with a stated phase V expansion in the annual report of 240,000tpm and capex of R65m ($9.1m), while these numbers might not be directly comparable it looks as if the scale of the expansion may have reduced while its cost might have increased," said John Meyer from Numis Securities.

"Management may have taken a more cautious view following certain public statements made by Mr Mugabe, president of Zimbabwe relating to Black Economic Empowerment in the country, indicating that BEE (local) interests should exceed 51% ownership," he said in a note.

Paton commented that; "discussions over the new mining legislation are still taking place between the Chamber of Mines of Zimbabwe and the Zimbabwe government.

The situation has not been fully resolved.

"The stated requirement that there be a 51% indigenous stake in the mines is not as bad as it may seem because the 51% requirement can be met in various ways and does not have to consist purely of equity.

"We remain hopeful that the end result will be similar to the situation in South Africa with the requirement for a 26% empowerment equity stake to be achieved over a 10 year period," Paton said.