Zimplats revenue increase 9%

Published: 31 August 2017

Zimplats revenue for the year increased by 9% from $471.8 million in FY2016 to $512.5 million despite a 5% decrease in 4E sales volumes from 582 833 ounces to 555 892 ounces. Revenue was supported by an increase in average metal prices as gross revenue per platinum ounce improved from $1 638 in FY2016 to $1 868 in FY2017.

Cost of sales decreased by 6% from $390.7 million in FY2016 to $367.1 million in the current year largely due to the 5% decrease in sales volumes.

Gross profit margins improved from 17% in FY2016 to 29% in the current year mainly due to the improvement in metal prices.

Operating cash cost per platinum ounce increased by 2% from $1 197 in FY2016 to $1 225 in FY2017 due to a 3% decline in platinum production (including sales in concentrate form) and an increase in prices of consumables.

The profit for the year ended 30 June 2017 was boosted by a total of $34.8 million realised from the export incentive and disposal of treasury bills from the Reserve Bank of Zimbabwe (RBZ).

In May 2016, the RBZ introduced an export incentive scheme to promote the export of goods and services to enhance inflows of foreign currency. The Group was awarded a 2.5% export incentive on export proceeds received in Zimbabwe. As a result, $14 million (FY2016: $1.1 million) was recognised in the income statement.

The Group realised $20.8 million from the disposal of treasury bills with a total nominal value of $34 million, which were issued by the Government of Zimbabwe to Zimbabwe Platinum Mines (Private) Limited, the Group’s operating subsidiary, in settlement of the principal amount owed by the RBZ. The RBZ debt had been written off in full in prior years.

As a result of these factors, profit before income tax for the year increased from $29.4 million in FY2016 to $101.3 million.

Income tax expense for the year increased from $22 million in FY2016 to $55.8 million in line with improved profitability.

Net cash generated from operating activities increased from $36 million in FY2016 to $56.1 million.

At year-end, the Group had unchanged bank borrowings amounting to $109 million (2016: $109 million) and a cash balance of $70.3 million (2016: $55.7 million).

Operations
The Group achieved a record ore production of 7 million tonnes in FY2017 (FY2016: 6.6 million tonnes). This was made possible by the good progress made on the redevelopment of Bimha Mine, which contributed production of 916 000 tonnes (FY2016: 442 000 tonnes).

The Group has commenced scaling down production at Ngwarati and Rukodzi mines as planned as Bimha and Mupfuti mines ramp up to design capacities. The South Pit Mine has continued to bridge the ore supply gap caused by the collapse of Bimha Mine. The South Pit Mine is scheduled for closure in FY2018 when production from the underground mines will be sufficient to supply the concentrator plants.

The ground monitoring systems continued to signal stable conditions at all underground mines. The general conditions in the new Bimha Mine footprint have also remained stable, while insignificant closure incidents were recorded in the old abandoned footprint.

A record 6.7 million tonnes of ore were milled in the year compared to 6.4 million tonnes milled in the previous period. This was largely due to good plant running time achieved over the year and improved ore supply from the mines.
Production of platinum in converter matte decreased by 2% from 269 547 ounces in FY2016 to 262 871 ounces in FY2017 in line with the decrease in furnace throughput.

Four elements (platinum, palladium, rhodium and gold) (4E) metal production for the year also decreased from 541 001 ounces in FY2016 to 523 303 ounces in FY2017. The concentrates stockpiled during the furnace shutdown were exported during the year realising a further 18 198 ounces of platinum. Total platinum ounces produced and sold in the year decreased from 290 410 ounces and 288 063 ounces, respectively, in FY2016 to 281 069 ounces and 274 364 ounces, respectively, in FY2017.

Capital Projects
The Ngezi Phase 2 expansion project is now substantially complete with total expenditures to date, including commitments, of $458 million as at 30 June 2017. The project will be officially closed in FY2018.

The Selous Metallurgical Complex Base Metal Refinery refurbishment project remains constrained by cash flow challenges arising from depressed metal prices. The total project expenditure as at 30 June 2017 was $23.4 million.

The implementation of the Bimha Mine redevelopment project is progressing well and the project is on schedule to achieve design production capacity by April 2018. $20.6 million was spent on this project during the year bringing the total project expenditure to $36.5 million as at 30 June 2017. A total of $9.4 million was committed as at the end of the year.

The bankable feasibility study for Mupani Mine, the replacement for Rukodzi and Ngwarati mines that deplete in FY2022 and FY2025 respectively, was approved by the board in November 2016. The boxcut was completed and decline development commenced during the year. A total of $11 million was spent on the project and $1.1 million committed as at 30 June 2017. The mine is scheduled to reach full production of 2.2Mtpa in August 2025 at an estimated total project cost of $264 million.

A total of $4 million was spent on expansion projects during the year compared to $27 million in the previous period.

A total of $59 million was spent on stay in business projects during the period, 40% higher than the $42 million spent in the previous period.
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