Harare - The Mimosa mine in Zimbabwe – jointly owned by Impala Platinum (Implats) and Aquarius Platinum – had suffered a $1.7 million (R27.4bn) financial blow amid investor concerns arising out of regulatory uncertainty regarding the deductibility of royalties for income tax purposes.
Zimbabwe has the world’s second-largest platinum reserves after South Africa and has attracted investors such as Implats, Aquarius Platinum and Anglo Platinum.
However, the South African platinum producers in Zimbabwe are uncertain of regulatory and fiscal issues in the country, according to executives and fund managers.
Jean Nel, the chief executive of Aquarius Platinum, which controls half of Mimosa, said yesterday that “negotiations are continuing with the authorities to confirm that the royalties are deductible for income tax purposes”.
However, for the half-year period to December, Mimosa had taken a $1.7m knock arising out of this uncertainty.
“The financial impact of the non-deductibility of royalties was $1.7m for the half-year to December 2015, 50 percent of which is attributable to Aquarius,” Aquarius Platinum said.
Platinum producers in Zimbabwe are required to pay 10 percent in royalties, a rate they say should be lowered because of lower metal prices. The confusion was worsened by the silence from Finance Minister Patrick Chinamasa “on the non-deductibility of royalties for income tax purposes” in his 2015 national budget statement.
The budget statement had also hinted at the deferment of a 15 percent levy on exports of platinum that was not processed although the subsequent Finance Bill of 2015 was silent on this.
“Fiscal and financial issues need to be clarified to the satisfaction of stakeholders such as the companies involved. It affects them and when uncertainty emerges, it breeds disgruntlements and scepticism among investors,” said an executive at a resource fund management firm.
The Zimbabwe Revenue Authority said last week “gross mining royalties amounted to $82.13m” last year, although “mining royalties closed the year with negative collections of $19.42m due to a refund of $101.55m that was processed in the fourth quarter of 2015”, according to authority chairwoman Willia Bonyongwe.
In its quarter to June, Implats’ unit in Zimbabwe, Zimplats, said “the effect of the judgment was that the operating subsidiary overpaid royalties by $108m” during the period January 2004 to December 2014. For Mimosa, cash costs per ounce declined by 2 percent to $784 and the company is geared to continue instituting cost reductions.
Production from Mimosa attributable to Aquarius Platinum was 60 214 ounces while cash held by the company by the end of December was $2m.
Overall production from the mine decreased by 6 percent while volumes processed increased by 1 percent to 1.310 million tons against a slight improvement in the head grade to 3.65 grams per ton.