Reduced commodity prices affect Zimplats earnings

03 Mar, 2023 - 00:03 0 Views
Reduced commodity prices affect  Zimplats earnings

eBusiness Weekly

Nelson Gahadza

Zimbabwe’s leading platinum producer, Zimplats, says lower average prices for most of the metals it produces decreased during the half-year period to December 31, 2022, resulting in reduced earnings.

The company’s production is mainly focused on the six elements (6E) namely, platinum, palladium, rhodium, gold, ruthenium and iridium. Other metals that come from the 6E production are silver, nickel, copper and cobalt.

According to the group’s chief executive, Alex Mhembere (pictured right), all the minerals decreased except nickel compared to the same period last year.

He said revenue at US$545,5 million was 7 percent lower than prior period largely due to lower sales volumes with actual 6E ounces sold at 291 751 against 322 752 ounces in the prior period.

“The prior period benefitted from the sale of matte produced and stockpiled due to the administrative delay in the export of matte towards the end of the previous financial year,” he said in a statement of the financials.

Resultantly, profit before income tax for the period at US$221,5 million was 15 percent lower than US$261 million recorded in the same period last year.

Mhembere said income tax for the half year at US$61,9 million from US$90,3 million in 2021 resulted in profit after tax for the period of US$159,6 million compared to US$170,7 million achieved in the same period last year.

The group generated net cash inflows from operating activities amounting to US$122 million lower than US$261,3 million and paid dividends of US$120 million.

For the period under review, cost of sales at US$315,6 million was 7 percent higher than the same period last year’s US$294,9 million.

Consequently, gross profit margin was 42 percent, an 8 percent reduction from 50 percent achieved in the same period last year mainly due to the impact of higher than budget operating cost per 6E ounce in the current period.

“The depressed average US$ metal prices also had an adverse impact in the current period,” said Mhembere.

The group’s cash operating cost per 6E ounce, produced at US$822, increased by 17 percent from the US$707 reported in the same period last year.

Mhembere said this was driven by inflation related price increases on major consumables, 42 percent power tariff increase with effect from October 2022 and an increase in intermediated money transfer tax (IMTT) charges from 2 percent to 4 percent.

In terms of 6E production for the period, output increased by 6 percent to 300 738 ounces from 283 829 ounces in the same period last year mainly due to the introduction of the third concentrator module.

Ore mined during the period increased by 9 percent to 3,8 million tonnes from 3,5 million tonnes for the same period last year due to mine upgrades.

“This was mainly due to increased production output at Bimha and Mupani mines. Bimha Mine has been upgraded from 2,5 tonnes per annum (Tpa) to 3,1Tpa, while Mupani budget production output has increased from 0,4Tpa to 1,1Tpa,” he said in a production update.

Tonnes milled increased by 9 percent compared to the same period last year at 3,4 million. Mhembere said 6E head grade at 3,39 grammes per tonne (g/t) was marginally lower compared to 3,41g/t achieved in the same period last year due to increased contribution of ore from lower grade mines.

Mhembere said the development and upgrade of Mupani Mine, which replaced Ngwarati, Rukodzi and part of Mupfuti mines is on schedule.

He said Mupani Mine targets 3,6 million tonnes per annum in August 2028 and a total of US$225 million had been spent on this project as at December 31,2022 against an approved project budget of US$386 million.

Mhembere said the upgrading of Bimha Mine as part replacement of Mupfuti Mine is progressing well having achieved nominal production of 3,1 million tonnes per annum.

“The outstanding scope to sustain capacity targets completion in the first quarter of FY2024. A total of US$51 million had been spent on this project as at 31 December 2022 against an approved project budget of US$82 million,” he said.

The group’s third concentrator plant at Ngezi was successfully commissioned in September 2022 and ramped up to nameplate capacity in October 2022.

Mhembere said a total of US$97 million had been spent against an approved budget of US$104 million as at December 31, 2022.

“The remaining relates to process optimization and financial close out.”

The smelter expansion and sulphur dioxide (SO2 ) abatement continued implementation with on-site construction and offsite manufacturing of equipment.

He said the refurbishing of the mothballed base metals refinery (BMR) was approved by the board in November 2022 with an authorised capital budget of US$190 million and approved completion date of October 2025.

The BMR targets a capacity of 5 200 tonnes of nickel equivalent to current production volumes.

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