JOHANNESBURG (Business Day) -- Zimbabwe Platinum Mines (Zimplats) [ASX:ZIM], which is 87% owned by South Africa's second-largest platinum mining company, Impala Platinum (Implats) [JSE:IMP], is concerned about Zimbabwe's deteriorating power supply infrastructure, which is a critical factor in the company's overall growth strategy.
Implats chief executive David Brown said last week that a key issue for the company in Zimbabwe was certainty of electricity supply.
"Power supply is critical to the success of future development," Zimplats chief executive Greg Sebborn said in the company's 2006 annual report, which was released yesterday.
"Zimplats will urgently engage the government and the Zimbabwe Electricity Supply Authority on ways to source and secure adequate power supplies for its growth plans," Sebborn added.
Zimplats current electricity base load is projected at 50 megawatts during the company's year to June 2007.
Zimplats produced 90,000 ounces of platinum in the year to June and the company wants to increase output to 160,000 ounces at a cost of $258 million (R1.9 billion) by financial 2011. The Ngezi expansion on the Great Dyke in Zimbabwe will see two new underground mines built, as well as a smelter. In addition, the group has initiated a study to increase its platinum production to 300,000 ounces an annum. Over 15 to 20 years, Zimplats would increase its annual platinum output to 1 million ounces.
During the phase one expansion to 160,000 ounces, Zimplats power need was expected to grow to about 75MW, followed by 125MW during phase two, over 200MW in phase three and 400MW during phase four, according to the Zimplats annual report.
Zimbabwe is vital to Implats production growth as the company has limited options in South Africa.
Zimplats faces a number of threats in Zimbabwe, including uncertainty over the indigenisation requirements and skyrocketing inflation. An indigenisation requirement of 30% was realistic, while the Zimbabwean government persisted with 51%, said Brown.
"The economic and sociopolitical environment in Zimbabwe has unfortunately deteriorated further," said chairman Mike Houston.
Houston also expressed concern about the negative impact that the extended economic downturn was having on Zimbabwe's infrastructure, in particular the power supply, which might impact on Zimplats operations.