Zimplats: profits up 200%, increased tax liabilities

Zimplats, a subsidiary of South Africa’s Impala Platinum, on Friday reported a threefold profit increase and also said that it faced a $50,4-million tax bill.

The company boosted its after-tax profit to $85-million in the six months ended December, from $28-million a year earlier.

Turnover increased to $250-million in the half-year, representing a 45% increase on $172-million for the comparative period driven by a combination of higher production and improved metal prices.

However, CEO Alexander Mhembere said that operating costs for the period increased by 30% to $134-million, mainly as a result of 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.

“Provision was also made for amounts payable in terms of a share appreciation rights scheme that issues notional shares to senior staff that was introduced during the review period. With a significant portion of input costs denominated in South African rand, the continued strength of the currency relative to the US dollar had an adverse impact on costs,” he noted.

Further, exchange losses of $11-million were incurred, which were mainly a result of the revaluation of the rand-denominated loan.

TAX DISPUTE

Meanwhile, the platinum miner said that its additional profits tax (APT) liability had increased to $50,4-million, from the initial assessment of $23,5-million.

In a long drawn-out dispute between Zimplats and the Zimbabwean government, the miner initially faced a $23,5-million liability, which was issued by the Zimbabwe Revenue Authority (Zimra) in 2009, in respect of the period 2001 to 2007.

Zimplats paid the assessed amount in full, as the government had not promulgated the legislation to give legal effect to an exemption.

However, the audit section of Zimra reviewed the APT assessment in December and concluded that the deduction of income tax assessed losses in the derivation of net cash receipts, on which the APT is chargeable, was incorrect. Zimra has thus proceeded to issue an amended APT assessment in which they disallowed the deduction of income tax assessed losses. The effect of the disallowance is an $26,9-million increase in the APT liability.

Zimplats said that it had lodged an objection to the amended assessment and that a response was yet to be received. Should the response to the objection be negative, it was the board’s intention to seek legal redress.

MINING PERFORMED ‘WELL’

Meanwhile, both mining and processing operations performed well in the half-year, with a 23% increase in ore mined recorded on the previous year, totalling more than two-million tons, as the Bimha mine ramp-up continued.

Zimplats reported that the 2 078 000 t of ore milled was 6% 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.

“The satisfactory milling performance was despite an 11-day unplanned shutdown at the SMC concentrator, owing to a problem on the semiautogenous grinding mill discharge end bearing, which has since been rectified,” Mhembere said.

Mill grade was in line with expectations, while concentrator recovery at 82,3% was 2% higher than the previous year, following the optimisation of processes at the new Ngezi concentrator.

4E metal production totalled 180 733 oz, a 10% increase on the previous year’s production and in line with the higher throughput and recoveries.

Mhembere noted that metal prices have continued to improve, partly reflecting improved market sentiment and also production constraints in South Africa. Accordingly, metal prices realised during the half-year were significantly higher than for the same period last year.

The development of Bimha mine remained on course with the mine scheduled to achieve design production capacity by May 2011. Implementation of the Ngezi Phase II expansion project was also proceeding according to plan.

Source