Zimbabwe will proceed with plans to levy 15 percent on raw platinum exports starting next year, if producers fail to comply with Government policy and directive for miners to build beneficiation facilities.
Mines and Mining Development Minister Walter Chidhakwa said in an interview Government had no plans to change its position regarding tax on unprocessed exports, but said miners making progress to comply would be exempted from the levy.
However, Chamber of Mines chief executive Isaac Kwesu, said building of beneficiation facilities was happening at individual company level. But while he confirmed progress to that end, he did not know yet if Government was satisfied.
Government wants the producers to build beneficiation plants to increase the value of earnings to the country from the export of the finite resource. Zimbabwe has the second biggest known platinum reserves in the world after South Africa.
Impala Platinum Mines of South Africa warned earlier this year it would suspend expansion plans for its 50 percent owned Mimosa Mining Company in Zvishavane, if the Government proceeded to effect the tax starting from next year.
The tax was supposed to come into effect in January 2015, when it was briefly applied in April, but has since been pushed to 2018 to allow the miners time to set up the facilities.
However, it is unclear if the other 50 percent shareholder in Mimosa, Sibanye-Stillwater also of South Africa, shares the same view after it acquired Aquarius shareholding last year. But Implats’ group executive for growth projects Gerhard Potgieter, reportedly said that the project will not be affordable.
Potgieter was quoted by South Africa media as saying that his company had recently completed a feasibility study on a smelter for Mimosa and found it unaffordable.
“This is a clear stance between ourselves and Sibanye-Stillwater,” Potgieter said.
Implats reportedly said it would rather stop its $40 million expansion plan for Mimosa than continue to operate and make losses as a result of the raw exports levy.
Implats also owns a controlling 87 percent in Zimbabwe Platinum Mines, Zimbabwe’s platinum group metal (PGMs) extractor; listed on the Australian Stock Exchange.
Minister Chidhakwa said the threat to suspend expansion plans in Zimbabwe were Implats’ own plans, which had nothing to do with Government policy on value addition. He said other platinum producers had given assurance that they will comply.
“Those are their (Implats) plans. We said we want them to put up (beneficiation) facilities. We have agreed with Unki and they are building a smelter,” he said.
Zimplats early this year said it had suspended plans to refurbish its base metal refinery at Selous Metallurgical Complex, which was projected to cost $100 million for the first phase, citing resource constraints due to weak platinum prices.
It was estimated developing the BMR into a PGM refinery would gobble $500 million.
Minister Chidhakwa said the 15 levy was a Ministry of Finance and Economic Development requirement, but his ministry would intervene to secure exemptions to the tax for companies deemed to be working on programmes to comply.
He said if the Government reached an agreement with a platinum mining company regarding a programme of implementation for a beneficiation facility, it would allow the company time to comply, as agreed, and thereafter assess the progress.
“If they fail to agree with us on a programme of implementation, the policy becomes effective, if we agree and are happy (the levy will not be applied),” he said.
According to CoMZ, the producers have made some progress to build value addition facilities and they are waiting to find out if Government was happy about it.
“There is progress that has been done by members, however, we are waiting to hear whether Government is satisfied,” Kwesu said.
“This is company specific and companies report directly to Government and have made submissions.”
In April 2015, Zimbabwe attempted to levy the producers for raw exports, in an effort to nudge the producers to build beneficiation facilities in the country, but quickly suspended the tax after the miners halted all PGM exports citing losses.
Zimbabwe exports its platinum in largely unprocessed form to South Africa, which has refineries, for beneficiation into refined separate PGMs at a fee, which Government contends prejudices the State revenue and cost potential jobs.
Producers have previously cited the economics of setting up local refineries, $3,5 billion estimated cost, and low volumes, an annual average 420 000 ounces from three operating mines; Zimplats, Mimosa and Unki, for not setting up the facilities.