Zimbabwe Platinum Mines - Imara

OVERVIEW OF Q3 2012 FINANCIAL RESULTS
Improved quarterly performance. Zimplats recently issued its Q3
2012 financial results showing 32% q-o-q revenue growth to USD
28.0m. However, y-o-y revenues were down 2.0%. We attribute the
surge in quarterly earnings to improved metal prices.
Mining production was adversely affected by illegal industrial
actions. An industrial action at Zimplats led to a loss of two and
half production shifts during Q3 2012. As a result, tonnes mined at
1,125,000 were 1.0% below Q2 2012, though up 6.0% y-o-y. The
head grade at 3.33g/t was satisfactory at 1.0% above Q2 2012.
Tonnes of ore milled at 1,069,000 were 4.0% lower than Q2 2012 (up
6.0% y-o-y) owing to scheduled major plant maintenance
shutdowns. Overall, PGM production dropped by 2.0% to 90,557oz
q-o-q (up 8.0% y-o-y) on the back of illegal strikes and power
outages,which affected operations at the mine's platinum matte
furnace.
An increase in cash costs. Operating costs surged 18.0% y-o-y to
USD 76.4m from USD 64.9m in Q3 2011. We note that cost
performance for Q3 2012 was worse than same period last year due
to significant increases in electricity and employment costs.
Furthermore, the company’s local spend (including payments to
government and related institutions) increased by 6.0% to 69% of
total payments in Q3 2012. Consequently, the cash cost of
production per 4E oz was 1.0% higher than Q2 2012 and 12.0% higher
that Q3 2012, driven mainly by lower 4E production. Overall,
operating profit for the quarter amounted to USD 51.9m.
OPERATIONAL REVIEW
Phase II at advanced stages. We note that Phase II project is
progressing well, with a total spend of USD 89.0m by H1 2012.
Generally, all three mines are now operating at full capacity and as
a result ore mined totaled 2, 289,000 tonnes by H1 2012. We expect
this trend to continue as the expansion projects gain momentum.
Limited exploration drilling has resumed. We note that
exploration drilling has resumed in the areas north of Portal 10. The
overall FY12 exploration budget has been increased tenfold on FY
2011 and also allows for further exploration of Portals 5.
A number of legal issues still hanging. We recall that in December
2010, the Zimbabwe Revenue Authority (ZIMRA) issued an amended
Additional Profits Tax (APT) assessment in respect of the years 2001
to 2007, whereby it disallowed the deduction of income tax
assessed losses in the derivation of net cash receipts. The effect of
this disallowance was to increase the previously assessed APT
liability by USD 26.9m to USD 50.4m.
The Zimplats board is of the view that the amendment of the APT
assessment was based on incorrect interpretation of the provisions
of the Income Tax Act. An objection to the amended assessment
was lodged, but dismissed by ZIMRA. As a result, Zimplats has
lodged an appeal through the Special Court of Income Tax Appeals,
but the case is yet to be heard. On another note, ZIMRA has
demanded royalties allegedly owed in the sum of USD 22.9m for the
period January 2010 to September 2011. The royalties were
computed at rates set in terms of the Mines and Minerals Act (as
read with the Finance Act) rather than the Zimplats Mining
Agreement.
Production Statistics Q3 2011 Q3 2012 % Δ
Ore Mined Tonnes (000) 1,062 1,125 6%
Head grade 3.34 3.33 0%
Processing Q3 2011 Q3 2012 % Δ
Ore Milled 1,007 1,069 6%
Recovery (4E%) 83 82 0%
Metal in concentrate 4E oz 89,260 94,321 6%
Metal in converter matte 4E oz 84,007 90,557 8%
Nickel (tonnes) 810 941 16%
Copper (tonnes) 593 681 15%
Metal Sales Q3 2011 Q3 2012 % Δ
4E (oz) 85,069 89,979 6%
Nickel (tonnes) 803 935 16%
Copper (tonnes) 586 677 16%
Income Statement (USD 000) Q3 2011 Q3 2012 % Δ
Turnover 130,539 128,211 -2%
Operating Costs (64,959) (76,356) 18%
Operating Profit 65,580 51,855 -21%
Cost Analysis (USD) Q3 2011 Q3 2012 % Δ
Cash cost of prod /4Eoz 702 785 12%
Net cash /4Eoz 433 561 30%
Revenue/4E oz 1,535 1,425 -7%
Zimplats: Operational Indicators
1,800
1,600
1,400
1,200
1,000
800
600
400
200
-
644
878
1,213
1,555
2005 2006 2007 2008 2009 2010 2011 2012F
Source: IAS/Company Reports
630
1,169
1,432
1,395
Gross revenue per 4E oz (USD) Cash cost per 4E oz (USD) Ore head grade (g/t)
Trend Analysis: 4E oz in Matte
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
-
Source: IAS/ Company Reports
2007 2008 2009 2010 2011 2012F 2013F
4E oz in matte produced
4E oz in matte sold
3.50
3.45
3.40
3.35
3.30
3.25
3.20
3.15
3.10
3.05
4