Zimplats considers loans for refinery


HARARE – Impala Platinum Holdings Limited (Implats)’s local unit, Zimbabwe Platinum Mines (Zimplats), says it will consider offshore loans among a cocktail of measures — together with other platinum group metals (PGMs) producers — to secure funding for a refinery.

This comes on the back of escalated pressure by government to have the platinum miners construct a refinery in the country with President Robert Mugabe recently threatening to ban exports of the metal in raw form.

Zimbabwe’s platinum is currently processed in neighbouring South Africa (SA).

“The lack of capital in the local market that we currently face in Zimbabwe suggests platinum producers may have to consider a combination of loans and retained cash flows to fund a refinery,” Busi Chindove, Zimplats’ corporate affairs head told businessdaily.

“To establish a sustainable refinery, however, requires a collective and substantial increase in output by all platinum producers.

“Indications are that producers are not too far from reaching the target of 500 000 ounces,” she said, adding that Zimplats had already taken steps to ramp up output through its Phase II expansion that will see production increase to 270 000 ounces per annum by 2015.

Chindove said Implats — holding an 87 percent stake in Zimplats, Aquarius Platinum Limited (Aquarius) and Anglo American Plc (Anglo)’s platinum units recently commissioned and completed a $30 million feasibility study to assess the requirements and conditions necessary to establish a refinery and additional smelting capacity.

According to the PGMs producers, the country needs investment to the tune of $5,3 billion and stable mining policies if it is to boost platinum output and viably operate the refinery.

Impala, through Zimplats, operates the Ngezi Mine while it also runs Zvishavane-based Mimosa operation in a joint venture with Aquarius. Anglo owns Unki Mine.

Together, the miners are forecast to produce about 365 000 ounces of platinum this year.

“The estimate for constructing the relevant smelting and base metal refinery and necessary facilities is approximately $2 billion,” said Chindove adding that “this cost estimate does not include investment in power and investment by the individual mining companies in increasing their production capacity in order to provide feedstock for the refinery.”

The Platinum Producers Association of Zimbabwe (PPAZ) has said the country must have adequate power supply in order to fully realise the benefits of a platinum refinery.

But the country is currently facing a crippling power shortage, generating around 1 100 Megawatts (MW) against a peak and growing demand of approximately 2 200 MW.

Imports are not adequate to cover the deficit. Herbert Mashanyare, PPAZ’s chairperson, recently said that the critical requirement to spur establishment and operation of the platinum refinery — estimated to cost at least a billion dollars — is electricity.

“We are confident … but this is all dependent on the availability of power,” said Mashanyare, adding that “our projections are that we will only have additional power within four to five years.”

Zimbabwe — with the second largest known platinum reserves in the world after South Africa — has pinned its economic recovery hopes on the mining sector, with platinum accounting for $424 million of the $1,4 billion mineral exports in the nine months to September 2013. Most of its platinum is processed in neighbouring South Africa.

Recently Mines minister Walter Chidhakwa said government was in talks with private investors to build a $1 billion platinum refinery, but accused local platinum group metals (PGMs) producers of “deliberately” delaying construction.

“There has been a process of deliberately delaying things and nothing has happened to date. As soon as the refinery is set up we will make sure that no platinum is exported out of Zimbabwe without being processed first,” he was quoted as saying, adding that the measure to ban platinum exports would only be taken once a refinery is operational.

Chidhakwa said that if platinum producers came together and established a refinery, which the local mining chamber says will cost at least $2 billion to build, the government could allow the mines to own more shares.

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