ZIMBABWE Platinum Mines (Zimplats) is still awaiting a government guarantee on the security of its investment in the country before it commits significant resources.
The appeal was lodged through Amos Midzi’s Ministry of Mines.
The platinum producer plans to inject fresh capital into the mining project, which was revised after government threatened to forcibly increase indigenous ownership in the mining sector from 15% to over 40%.
Zimplats awarded a 15% stake valued at over US$28 million to Nkululeko Rusununguko Mining Company of Zimbabwe which has been battling to pay for the shares.
The uncertainty about government’s plans have forced the company to maintain current production levels while it awaits a guarantee from government.
A Zimplats spokesperson confirmed they were yet to receive a formal response on its concerns.
“Zimplats has submitted a large-scale investment proposal to government but until this is agreed, no expansion can take place. Investors don’t invest unless there are clear terms which allow for the protection and repayment of their investment and these terms are not yet agreed with government,” the spokesperson said.
He said because of the capital-intensive nature of the platinum mining sector, production levels could only be increased with significant foreign currency inflows which would also have an impact on the company’s processing capacity.
“It should be recognised that Zimbabwe’s platinum resources, while extensive, are far smaller than those in South Africa and for this industry to achieve major expansion in Zimbabwe, there is need for massive inflows of foreign investment,” said the company spokesman.
“For this to happen, the investment terms must be competitive, failing which international investment capital will divert to South Africa at Zimbabwe’s expense,” the spokesman said.
He said the increases in the international price of platinum was likely to have a positive impact on the company’s earnings.
“The company exports a basket of metals and therefore total export earnings are determined by a combination of all prices. The metals are mainly platinum, palladium, rhodium, gold, nickel and copper, with platinum the major forex earner.”
The Australia-listed firm said the sudden shift in pricing was only short-term and this would change as South Africa increases production levels.
“It is likely that the prices will be sustained in the short-term, but they will inevitably decline as South African producers expand their output to meet demand, which is currently happening,” the spokesperson said.
International platinum prices are currently at an-all time high of US$882,50/oz, an increase of US$9 from previous trading levels.
The increase in the precious mineral prices has been attributed to the revaluation of the Chinese yuan, which is still projected to appreciate between 2-3% in the next 12 months.
China consumes 20% of world platinum produce and the country is able to buy more because of its strengthening currency.
Zimplats mines and processes two million tonnes of ore per annum, which translates to about 176 000 ounces of platinum, palladium, rhodium and gold per annum.
The Zimbabwean platinum sector has become the largest contributor of direct foreign currency earnings, generating US$77 million in the first quarter of the year, according to the Reserve Bank of Zimbabwe.
The figure translates to 16% of total foreign currency raised from the country’s mining sector in the first quarter.