Zimplats after-tax profit surges to US$85m

By Tawanda Musarurwa
PLATINUM producer Zimplats Ltd registered a 150 percent increase in profit to US$85 million for their first fiscal half year.
Zimplats increased its after-tax profit to US$85 million in the six months ended December, from US$28 million in the prior comparable period.
Its revenue increased to US$250 million in the half year, representing a 45 percent increase on US$172 million for the comparative period, driven by a combination of higher production and improved metal prices.
Despite the surge in profits, operating costs for the period increased by 30 percent to US$134 million, attributed to higher production volumes, increased royalties in line with revenue and royalty rate adjustments, and an increase in labour costs following the conclusion of the 2010 wage negotiations.
With respect to the company’s operations, both mining and processing operations performed well in the half-year, with a 23 percent increase in ore mined recorded on the previous year, totalling more than two million tonnes, as the Bimha Mine ramp-up continued.
Zimplats reported that the 2078 000 tonnes of ore milled was 6 percent above the tonnage for the same period last year, reflecting the fact that for the same period last year, the Ngezi concentrator only operated at full capacity for part of the period.
Meanwhile, Zimplats has said it has lodged an objection to the amended Additional Profits Tax (APT) assessment and that a response was yet to be received.
Zimplats chief executive officer Mr Alex Mhembere said that should the response to the objection be negative, the board would be compelled to seek legal redress.
“Management and the company’s tax advisers strongly believe that the Zimra interpretation of the deduction provisions of the 22nd and 23rd schedules of the Income Tax Act is incorrect and, accordingly, an objection to the amended assessment has been lodged.
“A response to the objection is yet to be received.
“In the event that the response to the objection is negative, it is the board’s intention to seek legal redress,” he said.
The Zimbabwe Revenue Authority recently issued an amended APT assessment in which it disallowed the deduction of income tax assessed losses.
The effect of the disallowance was that Zimplats’ APT liability almost doubled to US$50.4 million, from US$23,5 million.
Zimplats and the Government have been embroiled in a dispute on whether the company was liable for APT in view of the written undertakings given by Government in 2001 that the company would be exempted from the tax.
But due to the fact that the Government had not promulgated legislation to give legal effect to the promised exemption, Zimplats accepted an APT assessment of US$23,5 million issued by Zimra in 2009 in respect of the period 2001 to 2007, which has been paid in full.
In December, however, the audit section of Zimra reviewed the APT assessment and concluded that the deduction of income tax assessed losses in the derivation of net cash receipts, on which APT is chargeable, if positive, was incorrect, thus disallowing the deduction of income tax assessed losses.