Zimplats facilities in Zimbabwe where a large deposit of platinum in found. The strategic mineral is abundance in Zimbabwe and South Africa., a photo by Pan-African News Wire File Photos on Flickr.
Platinum miners wary of levy
January 8, 2014
Golden Sibanda Senior Business Reporter
Zimbabwe Herald
GOVERNMENT will meet mining firms tomorrow amid worries among miners the proposal in the 2014 National Budget to levy raw platinum exports could sterilise ground and throw the mining companies into the red.
Mining industry sources told The Herald Business the proposal in the Budget meant the effective rate of royalty for platinum miners had risen to 25 percent over and above other numerous fragmented existing mining charges.
The new levy follows intransigence by the mining companies to set up base and precious metal refinery in the country to ensure maximum benefit from extractive resources. It came into effect on the first of this month.
This is part of strong measures Government has proposed to compel platinum mining firms to beneficiate and value add to the primary resources with a total ban on raw platinum exports set to be effected next year.
The country has three active platinum miners namely Implats’ 87 percent owned unit Zimplats, Aquarius and Implats 50-50 owned joint venture Mimosa Mining Company and Anglo American subsidiary Unki Mine while a number of other platinum projects, including Todal and Ruschrome, were at different stages of development.
Former Mines and Mining Development Minister Dr Obert Mpofu gave the mining firms two years up to the end of this year to establish a refinery beyond which Government would ban the exportation of unbeneficiated platinum.
In pursuit of this goal, the Government this week invited a total of 10 local and foreign mining companies to submit expressions of interest proposals to establish base and special metal refinery in Zimbabwe to maximise returns from minerals as the deadline for exportation of raw platinum is now just short of 12 months.
Mining companies, through their representative body, the Chamber of Mines of Zimbabwe; will now meet Government tomorrow to discuss, chiefly, the proposed new platinum levy and other mining charges concerns.
Mines and Mining Development Deputy Minister Fred Moyo confirmed yesterday that a meeting was scheduled for tomorrow with the miners to discuss their concerns regarding proposed and existing policy matters.
“We have a meeting with the Chamber of Mines on Thursday. We have already had a meeting with the (small-scale) gold miners (association) to discuss such (charges) matters. We will also meet general managers and executives of the mines,” Deputy Minister Moyo said.
While he would not comment on reports of mining firms’ concerns about the potential impact of the export levy on raw platinum exports he pointed out Governmentwill listen to and act on the policy concerns.
Government has insisted on the setting up of a refinery after designating mining as the driver of economic growth in the medium term. Zimbabwe is home to the world’s second biggest known deposits of platinum and currently produces about 430 000 ounces of platinum annually.
The emphasis on a refinery to ensure beneficiation and value addition also dovetails into Government’s plans thrust espoused in its new five year economic blueprint, the Zimbabwe Agenda for Socio-Economic Transformation that will guide its programmes for the period 2014 and 2018.
Contacted for comment CoMZ chief executive Mr John Chikombero said that such kind of engagements were common between the chamber and its parent ministry to discuss issues affecting the mining industry.
“These types of engagements will always happen to discuss issues pertaining to the industry including issues that come from the budget,” he said.
But sources said platinum mining companies were worried about the impact the new levy will have on the top line and bottom line of miners who, already, are liable to a 10 percent royalty charge on gross exports.
Mining firms are liable to royalty rates that include gold (7 percent), platinum (10 percent) and diamonds (15 percent) effective since January 2012.
Other charges include Rural District Council unit tax, Environmental Management Agency discharge fees, Mineral Marketing Corporation of Zimbabwe levy, Standards Development Levy among others. The introduction of the Radiation Protection Act and the Engineering Council of Zimbabwe Act added to these costs incurred by mining firms.
‘It (export levy) has serious potential of resource sterilization because miners have to raise their cut-off grade since they cannot sustain mining on low grades and that is assuming that they can remain profitable.
“And in a context where mineral prices are fluctuating as is happening with platinum, it means this could put companies in potential loss making position and make the ability to expand operations difficult,” the source said.
For a long time now mining companies have complained about the level and number of many numerous and fragmented charges and levies they say increase the cost of mining and ground that can be viably worked.
Small gold miners lobby Govt
January 8, 2014 Business
Business Reporter
Small scale gold miners, led by the umbrella body — the Gold Miners Association of Zimbabwe — have expressed reservations over some 2014 budget provisions they say could negatively affect their operations. While ecstatic recognition of small scale mining has been accorded as captured in Government’s new economic plan, the miners said a number of fiscal policy proposals could harm the growth of small scale miners. Small scale miners account for about 50 percent of the country’s annual bullion output.
In its position paper on the 2014 National Budget presented by Finance Minister Patrick Chinamasa last month the Gold Miners Association of Zimbabwe said the Government needed to look at issues across ministries and agencies that burden their mining activities with high additional costs. GMAZ said such impediments were not consistent with mining sector driven objectives of the Zimbabwe Agenda for Socio-Economic Transformation, Government’s new medium term policy for the period 2014 to 2018, which recognises mining and beneficiation as critical elements for medium term growth.
“The reduction of royalty to 3 percent translates to better gold prices being paid to small scale gold producers. However, the provision that production should not exceed 500g is counterproductive in a number of ways.
“It encourages producers to divert any production that is greater than 500g to the black market or to misrepresent production figures. The Gold Miners Association of Zimbabwe is committed to 100 percent formalisation of the gold mining activities with a minimum of 400g per month without maximum.”
The small scale gold miners said they were working hard to ensure formalisation of all artisanal mining activities after Government proposed decriminalisation of their operations, but said it has in many instances faced resistance from cartels and individuals benefiting from thriving black market for the bullion.“GMAZ acknowledges that its goal for 100 percent formalization is not an overnight event. However, its programme targets a maximum of 18 months to attain this ideal goal which will be first in the world,” GMAZ said.
GMAZ said the Mines and Minerals Act does not recognise small miners, who pay the same fees, levies and charges as the large scale producers. The small miners have proposed differential charges and legislation.
“We feel that fees, levies and charges should not be or appear to be punitive, but must be supportive of the goal to eradicate illegal or informal activities,” said GMAZ. “Prospecting licences for small scale miners should be lowered to US$100 to facilitate regularisation of mining locations that have not been pegged.”
The miners explosives licence fees should be reduced to US$200 while special grant application fees of US$5000 should ideally be around US$1000. They said Environmental Management Agency fee should be reduced to between 5 and 10 percent for small scale miners who currently pay a similar rate as big producers.
GMAZ also expressed reservations about the US$6 000 annual licence fees demanded by Rural District Councils and that a smaller levy should be charged as mining companies have an obligation to contribute to infrastructure development. It proposed a small percentage of the production such as 0,5 percent levy.
The association said GMAZ requires its members to comply with National Social Security Authority, National Employment Council, Zimbabwe Manpower Development Fund and Zimbabwe Revenue Authority requirements.
It also appealed to the Government ministries and agencies to avoid and eliminate bureaucratic bungling. “For example, Special Grant applications, despite the high fees charged, are taking inordinately long to be finalised. In the spirit of Zim-Asset, GMAZ would like to collaborate with Government departments to overcome inefficiencies some of which might be induced by scant resources,” GMAZ said.
“The sum total of compliance costs, therefore, becomes prohibitively high and unattractive to small scale miners in the absence of collective action to revise levies, charges, fees and penalties,” GMAZ said.
“We also stress that legislation should be conducive to doing business and should aim at activity by working together with Government in crafting or improving legislation that is ultimately supportive of small miners.”
The gold miners said they welcomed the US$100 million earmarked for the small miners saying the GMAZ required its members to observe prudent financial management where loans are amortised in agreed periods.
“The association believes that disbursements from the US$100 million loan facility should be purely on merit with 100 percent loan recovery from the beneficiaries,” GMAZ said.
To mitigate risk, the small scale gold miners association has adopted a number of initiatives including engaging the Somanja Economic Development Institute for systems implementation on business and economic patterns, company systems, practical company roll out and strategic deal structuring for investments.
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