Mimosa acts on metal pricing

HARARE - As global platinum prices continue to decline, Zimbabwe’s second-largest platinum producer Mimosa Mine (Mimosa) plans to cut down on production costs to cushion its operations.

This follows Zimbabwe Platinum Mines pricing concerns at its half-year results presentation at the end of August.

Global platinum prices have hit an all-time low of between $1 375 and $1 475 an ounce, with leading metals research firm Johnson Matthey reporting an average of $1 400 in August.

The research group forecasts platinum prices will remain weighed down by depressed demand in the next 12 months due to the Eurozone crisis that has affected the automobile industry.

The automobile industry, a major consumer of platinum, is highly concentrated in Europe.

Mimosa chief executive Winston Chitando said his company would focus on improving efficiencies to beat the price scourge.

“The strategy is to manage costs, because you can’t control the price so costs are the only thing that you can manage,” he recently told businessdaily. To manage costs, you do it by increasing production and you then try and be innovative around fixed costs,” he added.

This follows Aquarius Platinum (Aquarius) chief executive Stuart Murray’s statement at the company’s full year results presentation for the period to June 2012 that the group is concentrating on improving efficiencies and productivity as well as rolling out an operator owner model in 2013 “in order to conserve cash for better times.”

Aquarius is an equal share partner with Impala Platinum in Mimosa. Murray said unprofitable operations, at current low prices, have been placed on care and maintenance for the duration of the current downturn in order to minimise costs and at the same time maintain the assets.

Aquarius said its Zimbabwean mine was the lowest cost mining operation on the group’s portfolio.

Mimosa, located on the Wedza sub-chamber of the southern portion of the Great Dyke, has a monthly capacity of 185 000 tonnes.

In the full year results, Mimosa recorded a 44 percent increase in platinum group metals (PGM) production to 210 895 ounces and a one percent growth in processed volumes to 2,3 million tonnes.

Mining cash costs increased by 12 percent to $70 per tonne while PGM ounce cost increased by 11 percent to $769.

Aquarius said cost increases during the year were attributable to deteriorating ground conditions and the associated use of additional equipment.

“Sales-related costs such as royalties, commission and technical fees were below budget, in line with lower sales revenue. However, royalties were higher than budget owing to the increase in rates on platinum and gold metals,” said the group.

The Zimbabwean government raised mining fees and royalties on gold and platinum to seven percent and 10 percent of revenue respectively, putting more pressure on costs, in what the Chamber of Mines of Zimbabwe says will heavily affect operations.

Corporate tax has remained at 25 percent and review of the Income Tax Act is still underway and is expected to be finalised by year end.

The mines body said it will make mining less concentrated ores unprofitable.

Mimosa is also required to cede majority shareholding to Zimbabwean locals under the Indigenisation Act.

As part of the fulfilment of the indigenisation and empowerment policy, Mimosa officially launched the Zvishavane Community Share Trust in  February and is in discussion with government to comply with the legal requirements.

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