Tax smacks Zimplats profit, but continues to study growth options

Alex Mhembere, CEO, Zimplats

A MASSIVE increase in tax payments weighed on Zimplats’ profits, a business unit of Johannesburg-listed Impala Platinum (Implats), however, the firm’s CEO, Alex Mhembere, said the company continued to study “new and replacement” projects.

Zimplats is also readying the recommissioning of Bimha mine which will boost output. Zimbabwe has the world’s second largest platinum reserves. In addition to Implats, Anglo American Platinum (Amplats) and Sibanye-Stillwater have operations in the country.

In the year ended June 2018, Zimplats raised revenue 14% to $583m although after tax profit was significantly down at $3m owing to increased tax payments. In its 2017 financial year, the full year taxed profit amounted to about $45m.

“Corporate tax went up 50%, and additional profit tax also increased”, said CFO, Stewart Mangoma, accounting for the year-on-year decline. “The major effect came from deferred tax. We also changed our status from special mining lease to a mining lease. The change in tax the rate made us to adjust our tax payments,” said Mangoma.

Earlier this year, Zimplats reached an agreement with the government to give up land it held in excess and measuring around 24,000 hectares. It, however, managed to secure guaranteed mining leases on land it is currently operating from, bringing closure to the land tenure issue that had previously caused uncertainty.

Mhembere told Miningmx that the government now needs to fix the fiscal regime for the mining sector to boost profitability and attract investments. Other mine managers in Zimbabwe say mining fees and royalties have to be reduced to make the country a competitive mining investment destination.

“Obviously, we still have issues to do with the fiscal environment in terms of the deductibility of royalties as an expense. The royalty rate is also still high compared to other markets in the region,” Mhembere said.

Platinum production for Zimplats for the year to end June was 4% down at 271,000 ounces while palladium was also down by 4% at 223,000 oz. The company had a small cobalt production of about 87 tonnes, which was 30% up on the prior year.

Regarding progress on rehabilitating the Bimha mine, Mhembere said the project was now advanced and almost ready to come back into full production. The mine was closed owing to a partial mine collapse which raised concerns about its ongoing safety.

In the full year period under review, Zimplats spent as much as $136m on capital projects, including about $60m on rehabilitating Bimha mine. Progress is also being made on another mine which will replace two projects that are nearly out of life. “There is still some equipment we need to install underground in terms of underground rushers at the mine,” Mhembere said.