JOHANNESBURG (miningweekly.com) – JSE-listed Aquarius Platinum on Wednesday reported that its Zimbabwe-based Mimosa joint venture operation had again performed “strongly” in the six months ended December 31.
It produced about 60 000 oz of platinum in the second quarter of the current financial year – the highest ever quarterly production for the operation.
“This was a brilliant performance,” CEO Jean Nel said in a conference call, citing a reduction in the operation’s production costs, a steady increase in production and a consistent operating margin as keys to the mine’s success.
Unit costs at Mimosa decreased by 7% in the six months to December, compared with the first half of the prior financial year. This reflected the benefits of the company’s rationalisation programme, which was implemented in the 2014 financial year.
Further, Aquarius noted that a scoping study and prefeasibility study had been completed last year, which considered increasing the plant and mine hoist capacity by between 25% and 30%.
Capital expenditure of about $82-million would need to be invested in the expansion project.
The project was expected to deliver an additional 60 000 oz/y and a feasibility study was expected to be completed by September 2015.
However, the profitiability and success of the project was overshadowed by the introduction of a possible export tax and indigenisation by the Zimbabwe government.
The tax, at a rate of 15% of revenue, was first tabled in 2013 to promote beneficiaiton, but was deferred to January 1, this year. While the Zimbabwe Finance Minister announced that the government would defer the export tax of unbeneficiated platinum until January 1, 2017, the deferral was not gazetted.
“This effectively meant that the tax was not legally suspended and, if implemented, will have a significant impact on the company,” Aquarius said in a statement.
“We continute to respect the laws of the country in which we operate. It is not our place to comment or criticise fiscal policy. We continue to share, with the government of Zimbabwe, a vision for a growing and increasing mining sector. We particulalry want to play a role in that,” Nel noted.
Further, he pointed out that the principle of in-country beneficiation of minerals “was a principle which we support, but as a producer, we can only support something that is structured and agreed over time”.
“It is up to us as producers in the country to come up with a proposal and submit it to the government and to a level where they are able to support it in a manner that shows alignment between industry and government on the way forward.
“If we do that, and I think we are in an advanced stage of doing so, I’m pretty sure that we will be able to come to an agreeement with [the] government on a further deferment of the royalty,” he noted.
Further, Aquarius said it understood that the essence of this “impasse” was a desire by the government to see “real progress” by the platinum producers towards establishing smelting and refining capacity in Zimbabwe.
“Mimosa’s stated position was that it was too small to establish smelting/refining capacity standalone, but has committed to work with other mines to establish smelting capacity over time,” the company said in a statement.
Mimosa would also continue to interact with the Ministry of Indigenisation and Ministry of Mines to work towards a sustainable solution but, to date, no agreements or definitive terms have been agreed between Mimosa and the Ministry of Indigenisation.
ROYALTIES
The proposal to render royalties payable by Mimosa nondeductible for income tax purposes was implemented on January 1, 2014, and impacted Mimosa from the start of the 2014 financial year on July 1, 2013.
“This position has remained in the 2015 national budget. It has and will continue to negatively impact the company,” it said in a statement.
The financial impact of the nondeductibility of royalties was $4.2-million for the financial year to June 2014 and $2.6-million for the half-year to December 31, 50% of which was attributable to Aquarius.