• The company committed half a billion to capital projects
  • US$341 million was used to upgrade Mupani and Bimha mines
  • Amid a 27% global dip in platinum supply, these initiatives will benefit at large

Harare- Zimplats has committed US$516.8 million in capital projects amid a sluggish PGMs output in the third quarter to September 2023. Zimplats recorded one of the worst output increase averaging 1 to 2% both on quarter-on-quarter basis and year on year basis. Zimplats is the biggest producer of PGMs in the country making up to 80% of PGMs export market, positioning Zimbabwe as the second biggest platinum producer in the world.

The company operates five mines: Ngezi, Rukodzi, Ngwarati, Mupfuti, and Bimha mines. Among these, Rukodzi mine has already been depleted, reaching the depletion phase in the full year of 2022. Ngwarati and Mupfuti mines are projected to be depleted in FY2025 and FY2028, respectively. Hence, the company has committed a substantial portion of its funds to develop and upgrade Mupani and Bimha mines of up to US$341 million.

The company further allocated funds for various projects, including a 185 MW solar project, aimed to be completed by FY2028. The company is also conducting explorations at the Ngezi mine, expanding the smelter, implementing the SO abatement plant project, and refurbishing the Base Metal Refinery. All of these initiatives play a crucial role in the company's production process.

Zimplats stands to benefit from these initiatives in several ways. Using Grade 7 Logic, the development and upgrade of the Mupani and Bimha mines will result in increased production for Zimplats. By accessing new ore reserves and expanding their production capacity, Zimplats will offset the depletion of other mines. This will help the company maintain or potentially increase its overall output of Platinum Group Metals ensuring a steady supply to meet market demand.

Secondly, these investments allow Zimplats to extend the lifespan of its operations. By developing new mines and upgrading existing ones, the company can effectively prolong its production capabilities. This provides Zimplats with a longer-term outlook, ensuring continued production and revenue generation. It also allows the company to secure its position as a key player in the PGM industry, contributing to Zimbabwe's status as the second-largest platinum producer globally.

Now, the investment in the 185 MW solar project brings additional benefits to Zimplats. By diversifying its energy sources, the company can reduce reliance on traditional power supply methods. Zimplats imports 50% of its electricity demands outside the country. Hence, this not only helps to mitigate potential risks associated with power disruptions but also provides opportunities for cost savings and increased operational efficiency.

With the expansion of the smelter, implementation of the SO abatement plant project, and refurbishment of the Base Metal Refinery, this enhances Zimplats' processing capabilities. These improvements can result in higher recovery rates, the production of higher-quality end products, and potentially increased profitability. By investing in these areas, Zimplats strengthens its competitive advantage by offering advanced processing capabilities that meet industry standards and customer requirements.

With these projects, Zimplats is well-positioned to benefit from the projected deficit in the platinum market and the expected surge in demand. As the largest producer of PGMs in Zimbabwe, it is poised to capitalize on the increased demand for platinum, especially with the growing importance of electric vehicle (EV) batteries.

The deficit of over a million ounces in the platinum market, as projected by the World Platinum Council, indicates a significant supply-demand imbalance. With demand expected to surge by 27 percent annually while supply remains flat, platinum prices are likely to increase despite their current bearish form.

The resurgence in China’s economy, coupled with the country's leading position as an EV battery manufacturer, has resulted in increased imports of platinum. This surge in demand from the EV industry creates a favorable market environment for Zimplats, as it can supply platinum to meet the growing needs of battery manufacturers. Russia’s production is already not substantial as it is hit by sanctions hence, European players and the US will source the resource prominently from Zimbabwe and South Africa.

In Zimbabwe, the contribution of the platinum industry is expected to reach US$2 billion in the country's overall mining industry, which is valued at US$12 billion this year. and Zimplats, being a major player in the industry, stands to benefit from this contribution.

It is worth noting that the sluggish output experienced by Zimplats coincided with a period of declining PGM prices. While this may have initially had a negative impact on the company's financial performance, the projected increase in demand and tightening supply in the platinum market can potentially offset this effect. As platinum prices rise due to the supply-demand dynamics, Zimplats can expect improved profitability and financial performance in the long run.

Q3 Performance

During the quarter, Zimplats saw a 1% increase in the volume of ore mined compared to the previous quarter, due to the introduction of pillar reclamation operations at Rukodzi Mine and the ongoing ramp-up of production at Mupani Mine. Additionally, the 6E head grade, reflecting the combined grade of platinum group metals  improved by 1% on a quarterly basis due to an enhanced ore mix. However, when compared to the same period in the previous year, the 6E head grade was 2% lower as a result of the increased contribution of low-grade Mupani Mine development tonnage to the total ore milled.

The volume of ore milled increased by 1% to 1.96 million tonnes compared to the previous quarter. This growth was attributed to the increased milling capacity resulting from the commissioning of the Ngezi Third Concentrator plant in September 2022. Furthermore, there was a significant 13% increase in ore milled compared to the same period in the previous year, benefiting from the expanded milling capacity. As a result, the 6E metal content in the final product also increased by 1% in line with the higher milled volumes. However, it is important to note that the metal content in the final product was 18% higher than the comparative period, which was affected by a scheduled furnace shutdown.

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