Zimbabwean currency volatility has become a major concern for Impala Platinum (Implats) in recent years, with the platinum group metal (PGM) miner aiming to distance itself from the country’s new legal tender.
In Implats’ latest results, the company flagged Zimbabwean currency fluctuation as a key risk to its business, adding that the situation has only worsened since the switch to Zimbabwe Gold, or ZiG, in April last year.
ZiG was introduced as a gold-backed alternative to US dollars, which most of the country still uses instead of near-worthless Zimbabwean dollars. Reuters reported in June that the new currency has largely failed to win over investors, with doubts over its credibility remaining despite local central bankers asserting that ZiG now has more than 100% reserve cover and is stable.
‘Material risks’
Zimplats remains a key contributor to group earnings before interest, taxes, depreciation and amortisation (ebitda), “but currency instability and regulatory uncertainty present material risks. The transition from the Zimbabwe dollar to the Zimbabwe Gold currency in [full year] 2024 introduced further exchange rate inflation pressures,” said Implats CFO Meroonisha Kerber.
Implats’ Zimbabwean assets form a core part of its mining portfolio, together being home to 45% of the group’s platinum reserves and over half of its palladium reserves.
Zimplats, the larger of the two Zimbabwe mines, contributes about 35% of group ebitda. It also has the largest mineral reserve of any single Implats mine and by far the longest lifespan of any of the group’s operations, with a 45-year life of mine.
Long-term planning challenge
In the next financial year, Zimplats is expected to produce 630,000oz-660,000oz, with a capital expenditure bill of $195m-$215m. However, unpredictable currency markets make long-term planning a challenge for the operation.
“Zimplats has implemented various initiatives to mitigate the impact of devaluation and usage of the [ZiG] and continues to engage proactively with government stakeholders to address policy-related challenges,” said Kerber.
Pressure on Zimplats’ margins saw the operation drawing on loans during the year and entering into two short-term loan facilities of R89m and R84m, respectively. The mine accessed a total R676m from its short-term loan facilities to fund its working capital requirements.
In the year to end-June, the Zimbabwean operations were responsible for nearly a fifth of the group’s 6E PGM output, employing a combined 11,096 workers.
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