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Implats backtracks on $500m Zim expansion
03/08/2014 00:00:00
by Business Day
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IMPALA Platinum may be on a collision course with President Robert Mugabe after the platinum giant rubbished talk this week that it had already approved a massive $500 million investment in South Africa’s troubled northern neighbour.

Zimplats, which is 87% owned by Implats, is an increasingly crucial source of revenue for the world’s second-largest platinum miner. Zimplats’ contribution is especially important since the five-month strike in South Africa played havoc with Implats’ production targets.

Implats’ share price has fallen 9.9% in the past six months. Last week, the group said that its earnings for the year to June would be more than 20% lower than last year, largely because of the strike in Rustenburg.

By contrast, Zimplats this week reported a 32% surge in quarterly revenue to $166.6-million, clocking up a healthy profit margin of 46.5% on the Zimbabwe business.

So it seemed to make sense when Alex Mhembere, CEO of Zimplats, told reporters that the parent company planned to invest $690-million in expanding a refinery in the country, which it bought from BHP Billiton.

Mhembere said it would invest this cash in two stages: the first costing $190-million and the second $500-million.

This would also have pleased Mugabe, who has called for more metals to be beneficiated at a platinum refinery in Zimbabwe. He has even threatened to ban exports of platinum that are not beneficiated.

But Implats’ South African head office immediately shot down the Zimplats plan.

Sources in the company said that while Implats had given the green light to the initial $190-million, it had not approved the final $500-million investment.

Implats’ reluctance stems from the fact that Mugabe’s government has yet to finalise its indigenisation plans by which Zimbabwe mines would be forced to sell 51% of their shares to locals.

“That part of the funding has not been approved. Such an announcement should not have been made by the Zimbabwe management,” said a source.

In an official response, Implats confirmed it had approved only a “$110-million base metals refinery upgrade” and another $80-million investment.

Johan Theron, spokesman for Implats, said that any further expansion to the refinery was still under consideration.

He said expansion beyond this was “in the early stages of technical consideration, and will be subject to, among other things, the business environment and the state of the platinum group metals industry”.


Implats’ reluctance echoed that of other companies, which are treading softly because of demands by Mugabe’s government for more revenue from mines.

Bruce Williamson, the Africa Resources Fund manager for Imara Asset Management, said investors’ views on Zimbabwe had not changed for the better.

Knowledgeable investors who understand opportunities in Zimbabwe were probably still watching with interest, he said.

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