The drop in global platinum prices is forcing Impala Platinum to cut planned spending across its business, including at Zimplats, and this will hurt local suppliers and the economy.
Platinum prices are down 15% so far in 2023 due to concerns over global economic growth and an anticipated slowdown in demand from vehicle makers.
“Planned elevated levels of spend across the portfolio will be adjusted to reflect the prevailing current reality of compressed industry margins,” Impala CEO Nico Muller says in a quarterly production update.
An Impala spokesperson said that while “near term strategic imperatives like the mining, concentrator and furnace projects have low risk of adjustment”, longer term projects like sulphur abatement and renewable energy projects could be deferred or face spending adjustments, Reuters reported.
He added the company was working on a range of responses to the depressed prices, which would be disclosed next February and was likely to include adjusting the full-year capital expenditure “materially downward”.
In 2021, Zimplats announced that it would spend US$1.8 billion in expanding operations in Zimbabwe, the single largest investment into the country over the past five years. The project would see Zimplats developing new mines, expanding processing facilities – including a sulphur abatement plant – and a 185MW solar farm.
Crunch time for suppliers
As miners cut back on projects, this will affect local suppliers and contribute to economic slowdown.
Zimplats accounts show that the company spent US$742 million on procurement in the financial year to June, a 26% increase from last year’s US$553 million. Of this amount, US$350 million went to local suppliers. This was 47% of the overall spend, down from 58% last year.
“The slight decrease in local spend was mainly attributable to Zimplats’ growth and expansion capital projects that had a significant import portion and hence 53% of overall spend was attributable to foreign spend,” Zimplats said.
Apart from larger local suppliers, Zimplats has a special procurement platform for smaller businesses, the local enterprise development (LED) programme. It currently has 22 SMEs. Among these companies is the women-led Turf Brick Moulding (TBM), whose Ngezi plant produced 12 million bricks for Zimplats projects over the past year, and CTS, which makes and repairs drivetrains for the mine.
Says Zimplats: “As at 30 June 2023, LEDs spend amounted to US$69 million, a 11% increase compared to last year’s spend of US$62 million. A total of US$407 million has therefore been invested in the procurement of goods and services from the LEDs since the programme’s inception in 2013.”
Low mineral prices have forced Karo Platinum to delay the completion of its new US$391 million mine in Zimbabwe by a year.
Because of weaker prices of minerals, Zimbabwe’s biggest source of foreign currency, the country’s export earnings fell to US$3.6 billion in the first nine months of this year, compared to US$4.5 billion over the same period last year, according to central bank. Finance Minister Mthuli Ncube says the economy will slow down in 2024 partly due to weak mineral prices.