Zimplats plans more power imports
ZIMBABWE’S largest platinum producer, Zimplats, is in discussions with ZESA Holdings for a deal to allow the platinum miner to import about 80 megawatts (MW) of electricity directly from Hydro Cahora Bassa (HCB) of Mozambique, the Financial Gazette’s Companies & Markets (C&M) can reveal.
This emerged as C&M reported last week that the country could fail to secure electricity imports from HCB after the Mozambican firm demanded cash upfront from ZESA for power imports. The move is certainly going to affect mining firms most, a situation that could precipitate reduced production and consequently losses for major mining firms.
Zimplats already has a contract running that allows it to import about 75MW of electricity through the ZESA grid from HCB. The contract expires in two years.
Zimplats, which is registered in Guernsey, British Isles, and is listed on the Australian Stock Exchange (ASX), is in the business of producing platinum group metals (PGMs) and is a subsidiary of one of the world’s leading producers of PGMs, South Africa-based, Implats, which contributes about 25 percent of global platinum output.
Zimplats chief operating officer, Stanley Segula, disclosed to C&M that the new deal would help Zimplats avert power shortages currently crippling operations, especially after the completion of the construction of a refinery for beneficiation, which requires increased power supplies.
“As we stand, we have power supply securitisation agreement with the power utility where we import through the grid from HCB,” Segula said.
“As much as our agreement is expiring in 2017, discussions have already started with the power utility and we believe we should be able to negotiate for a higher level. At the moment we are getting 75 megawatts (MW) and the refinery will take another five megawatts. So we are negotiating for about 80MW,” he said.
The development comes at a time when the country is facing increasingly unreliable electricity supplies due to poor local generation.
Currently, the country is generating about 1 000MW against a national demand of about 2 200MW of electricity at peak periods.
In order to mitigate this deficit, ZESA has relied on electricity imports from HCB to supplement local supplies that are failing to meet demand.
After realising that the country was not getting enough imports to augment supplies, the power utility resorted to increased load-shedding.
Recently, the Chamber of Mines of Zimbabwe told C&M that rampant power outages in the mining sector caused by faults and demand management related load-shedding had resulted in a loss of production time by as much as 10 percent.
Such outages affect the generation of the ore to feed milling plants which reduces daily output.
The recovery of the resources sector, which government, through its economic blue-print called the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, hoped to underpin revival of the country’s comatose economy, requires significantly higher power supplies than other sectors.
The mining sector is currently the single largest contributor to gross domestic product.
Zimplats is currently building a platinum refinery at a projected cost of about US$131 million. The refinery is expected to be commissioned in July next year.
The construction of the refinery follows threats by government to punish miners with higher tax for the export of platinum matte, a decision that has forced local platinum miners to scramble for a solution.
The other operating mines in Zimbabwe are Angloplats-owned Unki and Mimosa, which is jointly owned by Implats and Aquarius Platinum.
Zimplats’ latest financial report shows that the company posted a US$74,3 million loss in the full year to June 30 compared to a US$97,1 million profit in the previous year after losing key tax battles earlier in the year, coupled with depressed sales volumes and lower metal prices on the global markets.
PGMs are vital components in auto catalytic converters and play a significant role in reducing air pollution by limiting the discharge of carbon monoxide and other emissions in both gasoline and diesel engines.
PMGs are recyclable thereby ensuring not only a reduction in waste but also sustainability of supply. Their excellent resistance to corrosion and high melting points make them ideal metals for a variety of industrial uses. PGMs are also used in fuel cell development.
Fuel cells are able to reduce air pollution considerably while curtailing demand for fossil fuels.
Platinum prices at the international market are currently at an average of about US$1000 an ounce, threatening the viability of platinum miners.
Production of platinum group metals fell by 32 percent the quarter to June to 71 084 ounces after a breakdown at its furnace in May damaged some equipment.
The furnace was, however, repaired and has since returned to full production.