AQUARIUS Platinum Limited (Aquarius), 50 percent shareholder in the country’s second largest platinum producer Mimosa Mining Company (Mimosa) says it has engaged government over the recently imposed 15 percent tax on raw platinum exports.
In its half year to December 31, 2014 results, Aquarius, which jointly owns Mimosa with Impala Platinum Holdings, said the new tax regime will affect its operations and expansion plans.
“The company is engaging the authorities in consultation with the Chamber of Mines to seek clarity on the issue,” said Aquarius.
This comes as the platinum producer had earlier threatened to shelve expansion plans and suspend operations at the Zvishavane-based mine, if Zimbabwe goes ahead to effect the disputed tax.
Zimbabwe first proposed the levy in 2013 as part of measures to compel platinum producers to build refineries and process the metal locally.
It then postponed the levy’s introduction until January 2017 to allow the firms ample time to build the necessary smelting and refining plants.
But, the government’s Finance bill, which was published on January 9, proposes its introduction from January 1 2015.
With platinum prices already depressed, the tax would eat into the profits of companies with platinum assets in the country, which include Anglo American as well as Impala.
“Mimosa will begin generating negative cash flow and its shareholders will put it into care and maintenance, said Aquarius last week.
“The other short term impact is the inability to fund expansion capital expenditure.”Zimbabwe holds the world’s second-largest platinum reserves after South Africa and has been pushing for local beneficiation of the mineral.
But mining sources have said the volumes mined there are not high enough to make construction of a multi-billion-dollar refinery economically viable.
They are also sceptical that the infrastructure and the energy supply would be adequate to run such plants and point out that there is excess refining capacity in South Africa.
Even if such plants are built, there is a risk that they may be nationalised at some stage.
Over the past year, President Robert Mugabe’s Zanu PF led government has raised or imposed taxes on everything from mines to water in a bid to increase revenue to pay government workers. Their salaries account for about 88 percent of State spending.Advertisement
Mimosa is due to make a decision on a $70 million expansion this year, with the mine planning to add 70 000 ounces of platinum group metals a year to existing output of about 220 000 ounces.
If the expansion doesn’t go ahead, the shareholders will lose $183 million in potential revenue over the three years while the government will forgo $18 million in income tax, Mimosa said in the document. About 200 jobs would be created if it goes ahead, the company said.