Annual Report 2002

CEO's Review

Introduction

This past year has been another significant one for the company with many challenges having been faced and overcome The Ngezi/SMC Project, operated by Makwiro Platinum Mines (Private) Limited, (Zimplats’ 70% owned subsidiary), has been completed and brought into production during a period of economic decline and socio-political in the country.

Development

The concentrator at the Selous Metallurgical Complex was re-commissioned in November 2001, using stockpiled ore. In December 2001 the Ngezi opencast mine and the Ngezi to Selous road were completed and the first ore from the new mine was hauled to the Selous Metallurgical Complex.  The seventy-seven kilometre sealed road from Ngezi to Selous was completed within a period of two hundred days, a commendable effort.

Production

The first concentrates were sold to Impala Refining Services Limited in December 2001, and the smelter re-commissioning was completed in January 2002.  The first smelter matte was sold in January. The converters were re-commissioned in May 2002 and the first converter matte sold in the same month. Converter matte, the final product of the project, is now the only product sold to Impala Refining Services Limited.

During the first year of operations, twenty million tonnes of rock has been mined, including 660 000 tonnes of ore.  The 590 000 tonnes of ore that has been processed, at an average grade of 2.92 g/t 4E, is at a lower grade than the planned grade of 3.2 g/t 4E for this period. (“4E” is platinum plus palladium plus rhodium plus gold).

44 747 ounces of 4E was produced for the year, along with 287 tonnes of nickel and 225 tonnes of copper.  The planned production for the coming financial year is 174 000 ounces of 4E and 2 400 tonnes of nickel and copper combined.

The planned metal production for the financial year was not achieved due to a number of constraints during the commissioning process. These constraints have either been removed or plans to remedy them are well advanced. The details of the major items are commented on in the operations report in the annual report.

Project capital cost

The total capital cost of the project has come out within budget as depicted in the table below:

Safety, health and environment

The company’s safety, health and environment policy has been implemented and adhered to during the past year. In addition, the company’s code of conduct has been agreed to by the employees’ representatives and accepted and registered with the Ministry of Labour and Social Welfare.

Further details of these issues are contained in the annual report.

Human resources

Makwiro Platinum Mines (Private) Limited has been able to secure all its required management and supervisory staff locally and, except for a limited number of specialist positions, has not needed to resort to expatriate employees.

Security

This has and will continue to be an area of focus for management. Independent consultants reviewed the security arrangements at the Ngezi opencast mine and Selous Metallurgical Complex. Appropriate steps have been implemented to improve the security of employees and property.

Future growth

With the Ngezi/SMC Project achieving design mining and processing volumes, management will continue to focus on improvements in recoveries, operating efficiencies and grade control, whilst seeking to reduce operating costs. 

The Zimplats project team will also evaluate alternative mining methods and processing facilities with the objective of reducing future mining and operating costs and increasing metal production.

Government relations

The Government of Zimbabwe continues to support Zimplats in the development of its mining operations, and management maintains a close and good working relationship with the various ministries with which it is associated. Where possible, Zimplats seeks to ensure that the Government is aware of the developments taking place within the company and endeavours to ascertain from Government its plans and desired direction for the mining industry in Zimbabwe.

Community relations

Zimplats is involved in community issues within Zimbabwe and particularly in the vicinity of operations at Selous and Ngezi, and extending to the neighbouring towns of Chegutu and Norton, where employees reside.

The Zebakwe Housing Trust has been established through the donation of three hundred surplus housing units at Chegutu and Norton, plus US$1million, payable over nine years. Donations have also been made to local schools, and residents along the new company- constructed Ngezi to Selous road have been hired to maintain fencing and gates. Consideration is to be given to the establishment of small-scale enterprises capable of supplying consumables to the mine camp at Ngezi.

Zimplats believes that not only should the country benefit from platinum mining, but that there should also be a benefit to the local communities.

PGM prices

The table below shows the performance of platinum group metals (“PGM”) and gold prices during the year.  The uncertainty as to the timing of the recovery of the US and world economies suggest that the prices of platinum, palladium, rhodium and gold may possibly decline during the coming financial year.

The prices assumed by management are as follows:

In the longer-term, the increasing uses to which platinum is being put, along with an expected increase in jewellery demand in China, and the further implementation of vehicle emission controls, suggest that world platinum demand will exceed the planned increase in supply.  Platinum prices should therefore hold up well.  Palladium and rhodium will also be positively influenced by vehicle emission control legislation, whilst Russian palladium sales could impact negatively on its price. 

Nickel and copper prices will depend on the recovery in the world economy.

Conclusion

The achievements during the year would not have been possible without the commitment and hard work of management and staff of Zimplats and Makwiro.  On behalf of all stakeholders, I thank management and staff for what has been achieved.

Zimplats is grateful to Impala Platinum Holdings Limited for its assistance and encouragement during the construction and commissioning of the Ngezi/SMC Project.

Finally, to fellow directors, my thanks for the support and wise counsel during the year.

R.A. Pitchford

Chief Executive Officer and Managing Director