Unki says operations have ‘ground to a halt’ after ZIMRA garnishes US$24m over royalty dispute

Zimbabwe platinum unki
Unki mine: PGM prices under pressure

ZIMRA has garnished US$24 million from Unki Mines, leaving the country’s second biggest platinum operation at risk.

The revenue authority accuses Unki of underpaying royalties, but Unki has lodged an urgent court appeal against ZIMRA, saying the penalty violates the country’s own laws.

“The garnishing of the applicants account threatens its very survival as it has been left unable to conduct its normal business,” Unki Mines says in its papers.

The dispute began in 2018, when ZIMRA demanded royalty payments from the company. The miner paid in Zimbabwe dollars, but ZIMRA demanded payments in US dollars.

According to Unki, “the applicant is unable to trade, it cannot pay its suppliers (and) it cannot purchase raw materials”.

Says Unki: “In essence, the Applicant’s business has ground to a halt and should the present situation maintain, it will suffer irreparable harm, in that it will simply have to shut operations”.

ZIMRA says Unki underpaid its royalties by deducting beneficiation costs in calculating its liability for royalties. The agency argued that Unki must pay royalties based on the gross sale value of the beneficiated mineral, even if the miner does not sell beneficiated minerals.

“It is the applicant’s contention that (ZIMRA) has unlawfully and irrationally attributed costs to it, which costs were never lawfully incurred by it,” Unki argues.

Unki said that it should have been allowed to pay in Zimbabwe dollars, since as they were due in February 2019, when the Zimdollar was the sole legal currency. At a meeting in August this year, the two sides could not agree on the amounts payable. Unki sought a meeting with the ZIMRA commissioner, but their accounts were garnished before that could happen.

“The applicant was not even afforded a final warning to pay, nor did the 1st Respondent (ZIMRA) indicate that it no longer viewed negotiation as a viable resolution mechanism,” Unki accountant Stanford Pabwaungana says in an affidavit.

The shows the risks that investors in Zimbabwe face from the country’s uncertain currency regulations.

Last year, Unki, owned by Amplats, criticised regulations that force exporters to sell 40% of their export earnings to RBZ in Zimbabwe dollars.

“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,” the mine said.

Unki produces around 190 000 ounces of PGMs per year.