Zimplats, Zimra tax 'brawl' rages on

HARARE - Zimplats Holdings Limited (Zimplats) says it will appeal to the High Court for a review of the Zimbabwe Revenue Authority (Zimra)’s determination on the platinum miner’s interest on tax.

The group — a subsidiary of South African Impala Platinum Holdings Limited — last year lost a case against Zimra over a revised tax invoice of $33, 8 million.

Despite agreeing to settle the bill, the platinum group metals producer vowed to challenge the interest and associated penalties levied by the tax collector.

“The tax authorities have responded to the objection lodged by the company in September 2012 against the levying of penalty and interest on the prior years’ tax liability,” said Alex Mhembere, Zimplats’ chief executive, adding that a reduction in the penalty from eight percent to five percent of principal tax had been granted, but the objection against the payment of interest rejected.

“…an application will be made to the High Court to review the Commissioner-General’s determination,” he said.

Mhembere said an appeal had also been lodged with the Special Court for Income Tax Appeals.

The revised tax assessment covers the financial years from 2007 to 2012.

Zimra disallowed Zimplats to claim full capital expenditure as a deduction, a practice the company said stemmed from written undertakings it received from the country’s government in 2001.

Meanwhile, Zimplats incurred a $6,4 million loss in the half year to December 2012, down from a $68,4 million after tax profit registered in previous comparable period.

During the period under review, revenue declined significantly from $230,6 million to $176,5 million.
Basic and diluted earnings per share dropped from 63,55 cents to a loss per share of 5,93 cents while interest income increased to $987 000 from $83 000.

Mhembere attributed the slump in profit to reduced volume of metal sales and lower production in the period as a result of 42 day-long scheduled shutdown.

“Metal prices have remained depressed although there has been some recent improvement…,” he said.

During the shutdown, a total of 11 259 tonnes of concentrate were exported.

“Subsequent to the scheduled shutdown, a furnace fire in November resulted in the furnace being down for 21 days for repairs during which the concentrates generated were stockpiled for processing during the second half of the year.

“This was followed by a furnace run-out in December which resulted in a further three days lost time. As a result, 4E metal in converter matte sales were significantly lower than expected plan but both production and sales are anticipated to be on target for the year to June 30, 2013,” he said.

4E metal production in converter matte totalled 81 522 ounces, a decrease of 56 percent on previous year’s production.

Mhembere noted that although mining production was satisfactory, it was negatively affected by low equipment availability and poor ground conditions.

Ore mined totalled 2 370 000 tonnes, up four percent on the comparative period last year, while ore milled at 2 181 000 tonnes was one percent above the tonnage for the same period last year owing mainly to higher running time achieved at both concentrators.

“Mill grade was in line with expectations whilst concentrator recovery at 82,5 percent was good and in line with the prior year,” he said.

The combination of the above factors, Mhembere said, resulted in a profit before tax of $16 million, an 80 percent decrease on the prior period’s $80 million.

After bringing to account tax charges from prior years, a loss after tax amounting to $6 million was incurred compared to a profit of $68 million for the previous period.

At the end of the period, the group had debt net of cash amounting to $96 million.

The platinum miner highlighted that the implementation of the Phase II expansion project is progressing according to plan with a total of $76 million in capital having been spent during the half-year bringing total expenditure to $299 million. - John Kachembere

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