Oliver Kazunga Senior Business Reporter
ZIMBABWE’S largest platinum producer, Zimplats, has recorded a 74 percent increase in royalty and commission expenses to $12,2 million for the half year period ended December 31, 2018. During the comparable period in 2017, royalty and commission expense by the platinum miner stood at $7 million.
“Royalty and commission expense for the half year increased by 74 percent from $7 million reported in the same period last year to $12,2 million mainly due to an increase in royalty rates after migrating from a special mining lease to a mining lease on May 31, 2018,” said the company in its half year report for the period.
A royalty is a usage based tax, which is calculated as a percentage of the gross fair market value of minerals produced and not quantity. Royalties are levied in terms of section 244 of the Mines and Minerals Act[Chapter21:05], whilst the royalty rates are fixed through the Finance Act. The Mines and Minerals Act provides for a full rebate of royalty in respect of all minerals or mineral-bearing products used wholly within Zimbabwe.
In Zimbabwe royalties are charged depending on the mineral as and it is at 10 percent for platinum, 15 for diamonds and five percent for gold.
The giant miner said revenue for the period under review also increased by two percent to $291,8 million compared to the same period in 2017 driven by a one percent increase in both metal prices and 4E sales volumes.
The gross revenue per platinum ounce for the half year at $2,1 million was one percent higher than the $2,1 million reported during the same period last year.
“Cost of sales at $187,1million was two percent higher than the same period last year’s $184 million mainly due to inflation.
“This was partly offset by the substitution of open-pit ore with lower cost underground ore following the closure of the South Pit Mine in April 2018 and decrease in depreciation arising from the conversion of upper ores resources to reserves,” said Zimplats.
The platinum giant during the period under review, also benefited from an export incentive of $29,4 million (2017: $5,6 million) and the recognition of a $9,6 million refund due from the Zimbabwe Revenue Authority.
The refund arose from a court ruling in favour of the platinum producer in respect of fines inappropriately levied by Zimra on the disputed customs duty rebates case.
In 2012, Government issued a $28 million garnishee order against Zimplats to recover outstanding royalties, which the mining group disputed.