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CEO ReviewIntroductionThe financial year ending 30 June 2001 has been a significant year for the company and a number of milestones have been achieved:
Takeover of BHP Platinum Assets in ZimbabweIn January 2001 Zimplats acquired BHP’s 67% interest in the Hartley Platinum Joint Venture, and its 61.3% interest in the Mhondoro Platinum Joint Venture, for a nominal amount. Zimplats, through its subsidiary company HMC took over management of the Hartley Platinum Mine at the end of January 2001. HMC continued the care and maintenance programme from February 2001 until May 2001 when the recommissioning of the SMC facilities commenced. Project FundingUS$60 million project funding has been secured. The development cost is now expected to be US$54 million, leaving a balance of US$6 million funding to cover cost overruns or start-up delays. Implats invested US$30 million in HMC, in return for new shares issued equating to a 30% equity stake in the enlarged share capital. Absa has approved and committed, pending finalisation of peripheral documentation and conditions, to provide HMC with a US$30 million project loan. Broad terms of the loan are that it is repayable in four equal 6 monthly instalments, the first repayment being due 6 months after the last drawdown date. The Ngezi/SMC Project ("The Project")The Project is owned and managed by Hartley Management Company (Private) Limited, (70% Zimplats, 30% Implats). The Project is the first phase of Zimplats’ development of its resources and commenced in April 2001 with the start of construction of the Ngezi to Selous Road, the Ngezi Platinum Mine and the re-commissioning of the SMC. The SMC is scheduled to be operational in November 2001,and the construction of the Ngezi Platinum Mine will be complete in November 2001. The Ngezi to Selous Road will be ready to carry the first road trains of ore from Ngezi Platinum Mine to the SMC in early December 2001. Thereafter production at the Ngezi Platinum Mine should build up to its design capacity of 183,000 tonnes of ore per month by May 2002. The recommissioning of the SMC will be in two stages. The smelter will only come into operation after the mill and concentrator have operated at their design capacity for an acceptable period, and the required quantity and quality of concentrate feed is assured. In the interim period prior to the smelter start-up, Implats has agreed to receive concentrate from HMC instead of converter matte. Initial revenue from the concentrate, and/or matte sales is expected to be received in February 2002, with planned revenue streams accruing to HMC by mid 2002. Zimbabwe has a long history of mining and possesses a very good skills base. As a consequence, an excellent team under General Manager, Mike Houston, has been recruited. The management team is also supported by Implats which provides advice and training facilities. The name of the company is being changed to Makwiro Platinum Mines (Private) Limited. Makwiro is the name associated with the district around the SMC and Hartley Platinum Mine and the name change signifies the fresh start to operations including the Ngezi Platinum Mine. Government FacilitationThe Government of Zimbabwe played a significant role in assisting with the takeover of the BHP platinum assets in Zimbabwe. It released BHP from all its obligations and undertakings given in terms of the original Hartley Platinum Project Mining Agreement. This facilitated the purchase of the BHP assets by Zimplats. The Government has also facilitated the securing of the new foreign investment in the Ngezi/SMC Project through the provision of an acceptable fiscal regime based on the existing Mining Agreement between the Government and the Zimplats Group, and the new fiscal legislation for the mining industry. To the extent that the new fiscal legislation for the mining industry does not meet all the requirements of new foreign investors, Zimplats is permitted to use the fiscal provisions of the Hartley Platinum Project Mining Agreement (HPPMA). The road trains to be used to transport ore from the Ngezi Platinum Mine to the SMC exceed the normal limitations imposed for road transport in Zimbabwe. The Ministry of Transport has reviewed the specifications of the road train vehicles and their proposed operating procedures and has enacted specific regulations for their operation on the Ngezi to Selous road. Change in Controlling ShareholderDelta, having satisfied itself that Zimplats had secured funding for the Ngezi/SMC Project, reduced its shareholding in the company from 51.05% to 21.05%. The 30% equity was purchased by Impala Platinum (Zimbabwe) (Proprietary) Limited, a South African company owned by Implats (51%) and Absa (49%). The corporate ownership structure is now as follows:
Impala Platinum Holdings Limited (Implats)The investment in Zimplats and HMC by Implats, the world’s second largest platinum producer, has secured for the company the skills and expertise in PGM production that will assist in ensuring the success of the first phase development named the Ngezi/SMC Project. In addition to providing 50% of the project development costs, the presence of Implats provided Absa with additional comfort to also invest in Zimplats and provide a US$30 million loan facility to HMC. Implats has appointed three senior executives to the HMC board who provide Zimplats with considerable experience and expertise in the platinum industry. Implats is also facilitating the exposure of HMC management to the various Implats operations. This will enable HMC management to assimilate the successful operational practices employed by Implats and to introduce them at HMC. Impala Refining Services Limited has provided Zimplats with a favourable Offtake Agreement, which includes a metal financing facility that reduces the quantity of working capital required by HMC. The Offtake Agreement provides for Impala Refining Services Limited (IRS) to purchase the smelter matte from HMC. It should be noted that it is not a toll refining agreement. Implats has made a valuable contribution to the process of re-commissioning the SMC, including variations to the Offtake Agreement, in order to ensure potential bottlenecks are either removed or identified early. Objectives for Coming YearWith regard to the Ngezi/SMC Project, the following is a summary of the objectives for the coming year:
With regard to the further development of Zimplats’ other resources, to progress the feasibility studies of phases two and three. Future DevelopmentThe immediate focus for Zimplats and HMC is the successful implementation of the Ngezi/SMC Project first phase development. On completion of the first phase development, Zimplats will pursue the development of its other mineral assets which form one of the largest undeveloped PGM resources in the world. As such, it has the potential to significantly expand its annual production of PGMs and base metals. The existing excellent facilities at the SMC and the establishment of the Ngezi Platinum Mine will almost certainly result in future expansions occurring at these sites. The second phase of development is expected to be the construction of a ±2 million tonne per annum concentrator at the Ngezi Platinum Mine. This will reduce the 2 million tonnes of ore transported from Ngezi to Selous to ±90,000 tonnes of concentrate. The Ngezi concentrator will release the existing concentrator at the SMC to process ore from other sources. By that time, the intention is to have completed the feasibility study on recommissioning the underground mine at Hartley Platinum Mine, including appropriate trial mining. It is anticipated that the underground mine may be able to produce up to 800,000 tonnes of ore per annum. This production level was achieved during the mine’s former period of operation (under BHP) and it is expected that the mine will again be able to meet these output levels, and to be able to do so profitably after it is re-configured with new mining methods and equipment. A further 1.4 million tonnes of ore per annum is planned to be obtained from an opencast mine near the northern closure of the Hartley Geological Complex at Darwendale, fairly close to (about 15km) the SMC, that will be developed on Zimplats’ Selous tenements. The opencast mine will be very similar to that at the Ngezi Platinum Mine. The power rating of the smelter will be increased from 12 MW to 19 MW in order to handle the extra concentrate from the new concentrator at Ngezi. In addition, once planned processing levels are achieved, further supplies of concentrate will be sought to fully utilise processing capacity. When production of matte reaches 6,200 tonnes per year, it is believed that the base metal refinery (at the Selous Metallurgical Complex) could be re-commissioned. The processing procedure is to be modified in order to shorten the period that PGMs are retained within the refinery and a cost/benefit analysis will be required to ensure that the refinery adds value. The second phase of development is envisaged to be implemented over the next 5 years, provided economic conditions remain conducive to expansion. |
