(Bloomberg) — Mimosa Mining Co., a venture between Aquarius Platinum Ltd. and Impala Platinum Holdings Ltd., would shelve an expansion and its sole mine could be idled if Zimbabwe implements a levy on exports of unprocessed metal, a company document shows.
The companies asked Zimbabwe’s government last month to clarify whether they will be charged the 15 percent levy. While the Treasury said the tax would be deferred until 2017 in its annual budget statement in December a later finance bill didn’t provide for its deferral. Finance Minister Patrick Chinamasa said on Feb. 3 that it remains in place while talks take place with the mines ministry.
“Mimosa will begin generating negative cash flow,” and its shareholders will put it into care and maintenance, the company said in the document, seen by Bloomberg News. “The other short term impact is the inability to fund expansion capital expenditure.”
Care and maintenance means that essential are carried out so that the mine can be quickly restarted if conditions improve.
Over the past year President Robert Mugabe’s administration has raised or imposed taxes on everything from mines to water in a bid to increase revenue to pay government workers. Their salaries account for about 88 percent of state spending.
Fungai Makoni, the managing director of Mimosa, declined to comment when called on Sunday. Walter Chidakwa, Zimbabwe’s mines minister, didn’t answer calls made to his mobile phone.
Aquarius Platinum shares fell as much as 1.8 percent in Johannesburg to 2.22 rand after earlier climbing as much as 2.7 percent. Impala shares traded 0.2 percent down at 81 rand as of 3:08 p.m. local time.
Expansion Decision
Mimosa is due to make a decision on the $70 million expansion this year, with the mine planning to add annual production of 70,000 ounces of platinum group metals to existing output of about 220,000 ounces.
If the expansion doesn’t go ahead, the shareholders will lose $183 million in potential revenue over the three years while the government will forgo $18 million in income tax, Mimosa said in the document. About 200 jobs would be created if it goes ahead, the company said.
Last month Rio Tinto Group told its staff that newly imposed ground rental fees could cause the closure of its sole diamond mine in Zimbabwe. Alan Davies, the CEO of Rio’s diamond business, said the company is in talks with the government on Feb. 6.
