Implats gains 30% of Zimplats, Ngezi mine project

Were it not for the ominous shadow of Zimbabwe’s president, Robert Mugabe, Australian-listed Zimbabwe Platinum Mines (Zimplats) might have already developed its Ngezi open-pit mine and various other holdings covering a substantial portion of the nation’s Great Dyke. After all, this structural belt hosts the single-largest undeveloped platinum group metals (PGM) resource in the world, second only in significance to South Africa’s Bushveld complex. Unfortunately, investors have shied away from the region because of Mugabe’s domestic and foreign policies, which have plunged the nation into economic and social chaos.

During the recent Indaba conference in Cape Town, keynote speaker David Hale, global chief economist for the Zurich Insurance Group, said that if the present situation continues, millions of Zimbabweans face economic hardships, including possible starvation. “The aging despot has to go if his country is going to have any opportunity for economic recovery.”

Hale urged South Africa to condemn Mugabe’s botched efforts at land reform and his expensive military interventions in neighbouring countries, and to cease all aid payments and subsidies to his government. “I believe [South African] President Thabo Mebeki has done tremendous damage to both himself and to this country in not being more vigorous and more aggressive in criticizing the actions and policies of President Mugabe,” he said.

The ongoing turmoil is such that mining companies operating in Zimbabwe face challenges far greater than what they face elsewhere. Zimplats has had more than its share of woes since it was spun off by Delta Gold of Australia in 1998. It replaced Delta in the Hartley Platinum mine project, a joint venture with Australia’s BHP (BHP-N), among other projects in Zimbabwe. Unfortunately, the Hartley mine failed to live up to expectations, and operations were suspended in May 1999. The concentrator and smelter worked well enough, but, for various reasons, the underground mine was unable to produce the required 180,000 tonnes per month.

Zimplats has since acquired all of BHP’s platinum interests in Zimbabwe, which led to modifications of its original plan to develop a stand-alone mine, concentrator and smelter at Ngezi. The new study combined the Ngezi open-pit mine with the Hartley mine’s surface infrastructure, now dubbed the Selous metallurgical complex, situated 77 km away by road.

In the past year, officials from Zimbabwe’s mines ministry have worked hard to improve the investment climate for mining, including a commitment to allow special (and legally inviolate) foreign currency accounts for new mines. Unfortunately, political unrest during this period continued to thwart Zimplats’ financing efforts, which were complicated by rumours that Delta Gold wanted to reduce its equity stake in the company.

New partner

While numerous parties explored the opportunity to buy all or some of Delta’s stake in Zimplats, Impala Holdings (Implats) of South Africa took the leap in late March by offering to buy 30% of Zimplat’s Ngezi mine, plus the Hartley Platinum joint venture companies, for US$30 million.

Together with ABSA Bank of South Africa, Implats agreed to buy a 30% equity stake in Zimplats from Delta Gold for US$16.3 million. Delta Gold will retain a 21% stake in the company, with the balance held by various minority interests.

John Smithies, chief executive officer, says the stake in Zimplats and Ngezi provides Implats with a foothold in a highly prospective region. “We have received an overwhelmingly positive response from the government of Zimbabwe, which has undertaken to provide a suitable legal framework to facilitate this investment,” he says. “We are confident that our experience, our approach, and our existing interaction with successful platinum miners in Zimbabwe will stand us in good stead in this investment. The framework includes undertakings in terms of security of tenure and a favourable fiscal regime.”

Zimplats was proposing to produce 2.2 million tonnes annually from the Ngezi open-pit mine. Ore will be transported to the Selous complex, which will produce and process the concentrates. However, the refinery will remain closed until certain modifications, designed to improve its performance, are completed.

The bankable feasibility study is based on producing 100,000 oz. platinum annually for at least 20 years. Some 80,000 oz. palladium will also be produced, along with 8,000 oz. rhodium, 12,000 oz. gold, 1,300 tonnes of nickel and 1,000 tonnes of copper.

Capital costs to complete the project are estimated at US$50 million. Funding will come from Implats’ contribution to the project, and by debt financing provided by ABSA Bank. The partners hope to begin production as early as 2002.

Zimplats holds ground containing total resources of 2.4 billion tonnes grading 2.1 grams platinum per tonne (or 163 million contained ounces) and 1.5 grams palladium (114 million contained ounces).

The Ngezi North deposit hosts 426 million tonnes grading 2.2 grams platinum (31 million contained ounces) and 1.4 grams palladium (20 million contained ounces), whereas Ngezi South hosts 114 million tonnes of 1.8% platinum (7 million contained ounces) and 1.5 grams palladium (6 million contained ounces).

The underground mine at Hartley will remain closed during the first phase of development. However, Zimplats intends to carry out some trial mining in order to provide data for a re-evaluation at a later date, with a view to a possible reopening.