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Zimplats is cutting spending on its US$1.8bn projects

by Staff reporter
03 Nov 2023 at 08:22hrs | Views
The decline in global platinum prices is compelling Impala Platinum to reduce its planned expenditures across its operations, including Zimplats, which is expected to negatively impact local suppliers and the economy.

Platinum prices have fallen by 15% so far in 2023, primarily due to concerns regarding global economic growth and an expected decrease in demand from vehicle manufacturers.

Impala CEO Nico Muller, in a quarterly production update, stated that "Planned elevated levels of spend across the portfolio will be adjusted to reflect the prevailing current reality of compressed industry margins."

An Impala spokesperson mentioned that while short-term strategic initiatives like mining, concentrator, and furnace projects are unlikely to be adjusted, long-term projects such as sulfur abatement and renewable energy projects could be postponed or subject to spending reductions.

The company is working on a range of responses to combat the depressed prices, with plans to disclose them in February. These responses are expected to include a substantial reduction in full-year capital expenditure.

In 2021, Zimplats announced a $1.8 billion investment in expanding its operations in Zimbabwe, marking the largest single investment in the country in the past five years. The project involves the development of new mines, the expansion of processing facilities, including a sulfur abatement plant, and a 185MW solar farm.

As mining companies scale back their projects, local suppliers will be affected, contributing to an economic slowdown.

According to Zimplats' accounts, the company spent $742 million on procurement in the last financial year ending in June, a 26% increase from the previous year's $553 million. Of this amount, $350 million was allocated to local suppliers, accounting for 47% of the overall expenditure, down from 58% the previous year.

The decrease in local spending was primarily attributed to Zimplats' growth and expansion capital projects, which had a significant import component, leading to 53% of the overall spending being allocated to foreign sources.

In addition to larger local suppliers, Zimplats has an enterprise development program for smaller businesses, with 22 SMEs currently participating. These include companies like Turf Brick Moulding (TBM), which produced 12 million bricks for Zimplats projects over the past year, and CTS, which manufactures and repairs drivetrains for the mine.

As of June 30, 2023, the local enterprise development program's spending amounted to $69 million, an 11% increase compared to the previous year's spending of $62 million. Since the program's inception in 2013, a total of $407 million has been invested in the procurement of goods and services from local enterprises.

Low mineral prices have also compelled Karo Platinum to delay the completion of its new $391 million mine in Zimbabwe by a year. Weaker mineral prices have led to a decline in Zimbabwe's export earnings, with the country's export earnings falling to $3.6 billion in the first nine months of the year, compared to $4.5 billion during the same period the previous year, according to the central bank. Finance Minister Mthuli Ncube has indicated that the economy is likely to slow down in 2024, partly due to weak mineral prices.

Source - newZWire