Platinum groups bank on refinery investment

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SOUTH African platinum producers in Zimbabwe, which were this week battling fresh uncertainty, are banking on Impala Platinum’s $500m investment into upgrading its refinery facility although executives at the Johannesburg-based world number two producer of the metal have said the company will ultimately have to make a return on the investment.

Zimbabwe is pressuring the giant SA platinum groups to speedily set-up refinery facilities inside the country.

Gold mines are already compelled to sell their bullion through Fidelity, a unit of the central bank of Zimbabwe, while diamond mines are under growing pressure to undertake value addition inside the country.

Failure to speedily build a refinery will result in Harare imposing a 15% levy on exports of raw platinum. Experts and mining executives say the 15% levy will make Mimosa, jointly-owned by Implats and Aquarius Platinum, and Anglo American Platinum-controlled Unki “unviable”.

“The levy will make the Mimosa and Unki operations unviable and we are not sure where we are not understanding each other because as far as we are concerned, Zimplats is upgrading its facility so that the miners come in line with government expectations,” said an executive with one of the three producing platinum mines in Zimbabwe.

“The sudden shifts in positions will disrupt investment and project planning projects.”

Fin24 has reliably been informed that Zimplats has already responded to the government’s demands to have the platinum mines showing action on their plans to set-up a refinery facility.

Zimplats spokesperson Busi Chindove declined to comment on the communication to the government, which was delivered to Mines and Mining Development minister Walter Chidakwa’s office.

Chidakwa was not immediately reachable by phone on Friday although he has said that there have “not been any policy shifts on the issue” since the platinum miners were fully aware of the demands by government.

“We have not shifted our position and the letter to Zimplats outlines the position of the platinum producers in Zimbabwe,” a source directly involved with the issue said Friday morning.

However, Zimplats chief executive officer Alex Mhembere said in a recent interview: “People should understand that the machinery and equipment has to be ordered and delivered within lead times of up to six months or more.

“We are working as a team (including all the three platinum mines in Zimbabwe). We are funding the project as Zimplats,” Sources in Johannesburg said although Zimplats had committed to investing $500 million in the first phase of the refinery facility upgrade, the second phase would have to be operated on a commercial basis, enabling Zimplats to make a return on the additional investment. The first phase will have capacity to treat Zimplats’ own feed.

“Zimplats cannot just help Mimosa and Unki; if they are to invest in expanding the refinery, there will have to be a return on the additional investment.

So it will boil down to additional costs for Unki and Mimosa even if the refinery is to be expanded because right now Mimosa is capitalising on excess refining capacity in South Africa,” a source at Implats said.

The Zimbabwean platinum mines and the government needed to have come up with solution to the impasse today to avert implementation of the export levy this month.

The focus though, said sources, is now cantered on the possibility to expand Zimplats’ facility to be able to treat other producers’ material.

— Fin24