Amplats warns Zimbabwe on forex retention, ‘regulatory uncertainty’

Zimbabwe unki platinum
Unki Mine: production up due to US$62M investment

Zimbabwe’s decision to compel exporters to surrender more of their foreign currency earnings may leave miners unable to fund operations, according to Anglo American Platinum (Amplats), one of the country’s biggest platinum producers.

In January, the Reserve Bank of Zimbabwe (RBZ) announced that exporters, including mines, would now surrender 40% of their earnings to central bank, up from the previous 30%. The surrendered money is paid out to the miners in local currency at the official auction rate.

Amplats’ Unki Mine at Shurugwi is yet to be affected by the measure, but the company says the scheme may leave mines without enough of the forex they need to run mines, says Amplats.

“With most taxes and key inputs such as electricity being payable in USD, most miners will not have enough foreign currency available to fund operational requirements. Whilst it is too early to tell the full impact of the reduced retention levels, to date, Unki continues to meet its obligations to supplier and production has not yet been impacted,” Amplats says in its 2020 earnings report.

“We continue to engage the Zimbabwean authorities on these matters.”

RBZ changed the retention levels in order to fund the foreign currency auction system. However, the Chamber of Mines criticised the move, saying it will leave operators unable to fully fund operations or expansion.

‘Regulatory certainty’

In its report, Amplats also spoke on the uncertainty brought by an amendment to empowerment laws. Government’s attempt to exempt platinum and diamond miners from the 51% local ownership laws through the Finance Act, which gives effect to the 2021 budget, had the opposite effect; clumsy drafting left room open for government to designate local ownership for any mineral. In a statement on February 2, Government noted the error and pledged to fix it.

“Legislation giving effect to the statement is yet to be enacted,” says Amplats. “Regulatory certainty is key for the growth of the sector.”

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At Unki, platinum group metals (PGM) output for 2020 fell by 3% to 196,100 PGM ounces from 2019’s 201,700 PGM ounces due to disruptions caused by COVID-19.

Unki reduced production after government announced its first lockdown on March 28 last year. Mines were then allowed to open in early April, allowing Unki to resume full production. However, due to precautions, Unki lost nine days of production, concentrator operations lost 33 days, and smelting operations lost 60 days.