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Zim’s Q1 platinum output rises 2%

Business Digest
The lifting of the levy, which comes in the wake of other measures by the treasury allowing miners to pay royalties and a portion of their electricity bills in local currency, is expected to aid the challenges platinum group metal miners have been facing.

MTHANDAZO NYONI ZIMBABWE’S platinum output increased by 2% to 121 000 ounces (oz) in the first quarter of this year compared to the same period last year, the World Platinum Investment Council (WPIC) has said.

Last year in the first quarter, output stood at 118 000oz.

Total output for 2022 is seen at 465 000oz, down 4% compared to what was achieved last year.

The southern African country holds the world’s third largest proven platinum reserves after South Africa and Russia.

Output from Zimbabwe has an impact on global output and pricing trends.

The modest increase in platinum output comes at a time the government has scrapped the 5% levy on raw platinum exports that was introduced back in 2020.

The tax was meant to encourage the various mining companies in the platinum sector to invest in domestic value addition services in Zimbabwe.

Zimplats, Unki and Mimosa ship out semi-processed matte for final refining in South Africa.

The lifting of the levy, which comes in the wake of other measures by the treasury allowing miners to pay royalties and a portion of their electricity bills in local currency, is expected to aid the challenges platinum group metal miners have been facing.

In its first quarter report, WPIC said Russia’s invasion of Ukraine at the end of February sent shockwaves through the markets.

The report said global refined platinum production in the period under review declined 13% year-on-year to 1 279 000oz, primarily on lower output from South Africa.

South African production fell 16% to 167 000oz year-on-year during the review period.  Among factors behind the decline in South Africa, maintenance schedules constrained processing availability in the quarter under review as Impala Platinum (Implats) , one of the biggest producers, undertook a programme to rebuild its number three furnace.

“Operations faced headwinds during the first quarter of 2022 as Covid-19 and geopolitical events stressed supply chains, impacting equipment deliveries and disrupting mine output. Safety-related stoppages also continued to weigh on output. Production at Mogalakwena, Anglo American Platinum’s flagship mine (in South Africa), was curtailed by heavy rainfall in the period,” the report said.

Russian output declined 11% year-on-year.

The report said other regions remained largely flat year-on-year.

Total demand in the first quarter declined 26% year-on-year to 1 528 000oz. Key contributors to this performance were exchange stock outflows. Industrial demand was lower, said the report. Low demand was also the result of jewellery demand, which heavily depends on China, but was affected by Covid-19 restrictions.

“In 2022, we expect that the wider markets’ volatility that we have seen over the last two years will persist, in part due to the uncertainties of the conflict in Ukraine,” WPIC said.

It said there had been a sharp escalation in supply disruptions, leading to further inflationary pressures and tightening of monetary policy across a number of key economies.

“The International Monetary Fund downgraded its forecast for global economic growth for the year to 3,6%. Even so, we still forecast a modest growth in platinum demand of 2% year-on-year, although this reflects markedly different trends in a number of key segments. Among these, most importantly, we forecast automotive demand to increase by 16%, on expectations of a recovery in production and higher vehicle loadings,” it said.

On the supply side, mine supply is forecast to decline by 5%, mainly due to lower output from South Africa. Secondary supply will be constrained by reduced scrappage rates and lower jewellery sales.

This will result in a market surplus of 627 000oz, down notably on 2021,” it said.

“We have significantly revised our 2022 forecast downwards, primarily due to expectations of much lower output from South Africa. Three major producers, Amplats, Implats and Northam have lowered their guidance. Although subject to individual operational constraints, common headwinds of increased safety incidents and resultant production stoppages, community unrest and supply chain procurement challenges were cited.”

Overall, platinum mine supply is forecast to decline 7% year-on-year to 5 872 000oz due to the depletion of Anglo American Platinum semi-finished inventory that boosted refined volumes in 2021, while planned smelter maintenance in South African and Russia reduces processing availability.

South Africa will account for the bulk of the fall, with a forecast decline of 9% to 4 258 000oz. Output from North America is expected to grow 22% as Vale’s Sudbury production normalises following the strike in 2021.

However, regional labour shortages continue to impact operations and present a downside risk, the council said.

Platinum is one of Zimbabwe’s biggest foreign currency earners, with South African mining companies such as Impala Platinum and Anglo-American Platinum owning the biggest platinum group metals mines in the country.

According to the government’s vision of attaining a US$12 billion mining economy by next year, platinum is expected to contribute US$3 billion per year.