Platinum production costs soar

Godfrey Marawanyika

ZIMBABWE’S costs of extracting platinum shot up by 55% last year, making it one of the most expensive in the world, a report by London-based GFMS says in its Platinum and Palladium

2005 survey.


The report was released last week.


The report said cash costs in US dollar terms also increased in South Africa and North America.


“Zimbabwe suffered the sharpest rise of US$135/ounce, or 55%, following the 2004 implementation of royalty fees on mineral production and exchange controls,” the group said.


“…During 2004 the residual deficit narrowed considerably to just under 190 000 ounces by comparison with 2003’s level of approximately 550 000 ounces,” the survey said.


The report said South Africa’s cash costs increased by US$99, or 31% to $420 an ounce, while North American costs rose by 3%.


GFMS has representations in Australia, India, China, Germany and Russia and specialises in research into global gold, silver, platinum and palladium markets.


Global platinum output rose by 4,6 % to 6,3 million ounces in 2004, and is expected to continue rising in the short-term, the group said in its report.

For the past three years, Zimbabwe’s operating environment has been greatly constrained by power shortages, foreign currency blues and a lack of spare parts.


In January, the central bank introduced the Enhanced Platinum Sector regime, which resulted in platinum being classified as a strategic mineral.

The central bank also barred platinum miners from holding foreign currency accounts outside the country.


The directive caused anxiety among the platinum players in the country who were worried that they would not be able to access their money on time for inputs.


Under the arrangement, each platinum exporter will open four special currency accounts with a local commercial or merchant bank which will in turn lodge the foreign currency in a mirror offshore Trust Foreign Currency Account (TFCA) for the exporter, held by the central bank.


The four TFCAs will result in the creation of a platinum collection foreign currency account which receives all inflows including export proceeds, loan draw-downs or equity injections.


The TFCA will also have a debt-service coverage which guarantees the ability of the exporter to meet foreign loan repayment commitments through maintenance of a minimum debt service cover ratio of two months as determined from existing outstanding offshore loans.


Under the TFCA structure, this will also result in the creation of a sinking fund, which will secure and guarantee foreign shareholders the ability of the exporter to meet dividend payments.

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