Aquarius, Impala Mine May Close Over Tax, Document ShowsGodfrey Marawanyika
Mimosa Mining Co., a venture between Aquarius Platinum Ltd. and Impala Platinum Holdings Ltd., would shelve an expansion and its sole mine could be idled if Zimbabwe implements a levy on exports of unprocessed metal, a company document shows.
The companies asked Zimbabwe’s government last month to clarify whether they will be charged the 15 percent levy. While the Treasury said the tax would be deferred until 2017 in its annual budget statement in December, a later finance bill didn’t provide for its deferral. Finance Minister Patrick Chinamasa said on Feb. 3 that it remains in place as talks take place with the mines ministry.
“Mimosa will begin generating negative cash flow,” and its shareholders will put it into care and maintenance, the company said in the document, seen by Bloomberg News. “The other short term impact is the inability to fund expansion capital expenditure.”
Care and maintenance means that essential work is carried out so that the mine can be quickly restarted if conditions improve.
Over the past year, President Robert Mugabe’s administration has raised or imposed taxes on everything from mines to water in a bid to increase revenue to pay government workers. Their salaries account for about 88 percent of state spending.
Fungai Makoni, managing director of Mimosa, declined to comment when called on Sunday. Walter Chidakwa, Zimbabwe’s mines minister, didn’t answer calls made to his mobile phone.
Aquarius Platinum shares fell 0.4 percent to close at 2.25 rand in Johannesburg. Impala shares dropped 0.2 percent to 81.04 rand.
Mimosa is due to make a decision on a $70 million expansion this year, with the mine planning to add 70,000 ounces of platinum group metals a year to existing output of about 220,000 ounces.
If the expansion doesn’t go ahead, the shareholders will lose $183 million in potential revenue over the three years while the government will forgo $18 million in income tax, Mimosa said in the document. About 200 jobs would be created if it goes ahead, the company said.
“You have to feel sorry for Impala and Aquarius,” Peter Major, a mining analyst at Cadiz Specialized Asset Management in Cape Town, said in an e-mailed response to questions. “I have too many less-stressful investment alternatives.”
Last month, Rio Tinto Group told its staff that newly imposed ground rental fees could cause the closure of its sole diamond mine in Zimbabwe. Alan Davies, chief executive officer of Rio’s diamond business, said the company is in talks with the government on Feb. 6.