Zimplats profits take a dip in second quarter

lower than the previous quarter.
Revenue during the period amounted to US$114 million, 11 percent down from the quarter ended March 31.
Zimplats attributed the poor financial performance to factors including higher-than-anticipated operating costs, payment into its Community Share Ownership Trust and high royalties.
“Operating costs were 17 percent above the previous quarter in line with the higher sales volume,” said the company.
“In addition, the first tranche of US$3,3 million was paid to the Community Share Ownership Trust in terms of an undertaking to make available to the trust US$10 million over a three-year period.
“Royalties continue to be accounted for at the higher rates set in terms of the Finance Act whilst the company awaits resolution of the dispute currently before the courts.” 
Lower Platinum Group Metals (PGM) prices also contributed to Zimplats’ depressed profits. Metal prices continued their downward trend in the quarter, reflecting a PGM market in oversupply as well as continued concerns over the eurozone economies.
Gross revenue per 4E ounce was 21 percent lower than the previous quarter. The 4E stands for the four elements — platinum, palladium, rhodium, and gold that are found in the mineral resource.
“The depressed metal prices have put severe pressure on cash flows and the company will consequently have to secure higher levels of bank borrowings than originally envisaged,” said the report.
But Zimplats’ financial performance did not mirror a 13 percent increase in volume of metals sold during the period.
Generally, the company’s mining production was positive, up 4 percent from the previous quarter.
Tonnage milled was 8 percent higher than the previous quarter due to improved plant availabilities in contrast to the previous quarter when plant running time was affected by major plant maintenance shutdowns.
The 4E metal in matte production was 11 percent above previous quarter in line with the higher milled tonnage and the smelting of concentrates stockpiled in the previous quarter when the smelter was down for scheduled periodic maintenance.
The company also reported that its cash cost of production per 4E ounce was 22 percent lower than previous quarter driven mainly by higher production volume.
The company’s local spend (excluding payments to Government and related institutions) stood at US$65 million or 54 percent of total payments for the period under review.
Zimplats said its contribution to the fiscus, in direct and employee taxes, for the quarter at US$23 million was 25 percent lower than the previous quarter, mainly due to lower royalties, following the full payment of the disputed royalties in May 2012 and the weakening of metal prices.
Finance Minister Tendai Biti recently expressed gratitude for the company’s contribution to the economy.
“Zimplats is an anchor investment,” he said. “They have done a lot for this economy; we however need a platinum refinery in this country.”
Meanwhile, Zimplats has been guaranteed uninterrupted electricity supply for the next five years after it advanced a US$25 million loan to the Zimbabwe Electricity Supply Authority.
This money was used to reduce Zesa’s overdue indebtedness to Hidroelectrica de Cahora Bassa of Mozambique in respect of power imports.
The loan facility enabled Zimbabwe to resume power imports from Mozambique to augment the country’s constrained power generation.
The loan principal and interest have been converted into power units which will be redeemed over three years.
In respect of indigenisation, the company reports that a Joint Technical Committee comprising Government representatives and Zimplats management has been set up to work through material issues pertaining to an earlier agreed upon indigenisation plan.
Zimplats also said the Special Court of Income Tax Appeals has set August 9 2012 as the date when the Additional Profits Tax  case will be heard.
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 because 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 the Zimbabwe Revenue Authority in 2009 in respect of the period 2001 to 2007, which has been paid in full.
At the end of 2010, Zimra 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 increased significantly.