The Sunday Mail
Darlington Musarurwa Business Editor
THE Australian Stock Exchange (ASX) recently queried Zimplats’ curious 66 percent share price leap from A$3,60(US$2,76) to A$6(US$4,60) in a seven-day period to August 10, 2016, as investors cheered recovering platinum prices and the mine’s recent performance. Though the ASX’s inquiry is procedural, as listing regulations require companies to explain suspicious share price movements, it underscores how foreign investors are benefitting through betting on the platinum producer’s activities.
However, Government’s draft bill on mining will make mining rights a preserve of locally listed companies. On August 10, Lux Wigneswaran, ASX’s principal advisor (Listings Compliance), wrote to Zimplats’ investor relations manager Ms Kathrine Brown seeking an explanation over the company’s share price movement.
“We note the change in the price of the entity’s securities from a close of $3,60 on 3 August 2016 to a high of $6 today, 10 August 2016. “In light of this, ASX asks you to the following questions: Is the entity aware of any information concerning it that has not been announced to the market, which, if known by some in the market, could explain the recent trading in securities? . . .
“This request is made under, and in accordance with, listing rule 18.7. Your response is required as soon as reasonably possible and, in any event, by not later than half an hour before the start of trading on Thursday, 11 August 2016. If you do not have your response by then, ASX will have no choice but to consider suspending trading in the entity’s under securities under listing rule 17.3,” reads part of the letter.
ASX’s intervention is meant to safeguard investors from being prejudiced through insider trading, where a few investors benefit through accessing a company’s privileged information that can materially impact on the share price.
However, Zimplats chief executive officer Mr Alex Mhembere surmised that the share price could have jumped as a result of improved platinum prices on the international market and a 282 percent increase in net profit in the quarter ended June 30, 2016.
“Whilst we do not have any explanation for the recent trading in the entity’s securities, we do point out the following: The volume of the entity’s free-float shares is very low as Impala Platinum BV holds 87 percent of the entity’s shares; There have been recent improvements in metal prices; and the entity’s quarterly activities report for the quarter ended 30 June 2016, which was released to the market on July 29 2016, showed an improvement in the entity’s production from the last quarter and also reported a 282 percent increase the last quarter in profit after royalties,” responded Mr Mhembere.
Recovering prices
In the past four weeks, platinum prices, which fell 26 percent in 2015 owing to global economic uncertainty and the Volkswagen emissions scandal, recovered to US$1 106 per ounce from US$1 082 per ounce.
Platinum is mainly used in the manufacture of catalytic converters, which essentially convert toxic gases such as carbon dioxide to less toxic pollutants. By 2021, all cars registered in the registered in the European Union are not expected to emit more than 130 grammes of carbon dioxide per kilometer.
But, just like gold, investors are now increasingly investing in platinum as a safe haven.
Stellar performance
It is also believed that investors are upbeat about the performance of Zimplats and its prospects going forward.
The country’s biggest platinum producer recently announced that while its revenue for the quarter ended June 30, 2016 fell 7 percent to US$129 million from US$138,4 million a quarter earlier, net income spiked 282 percent to $25,6 million in the same period.
The ore mined in the review period also increased 2 percent to 1,7 million tonnes from 1,6 million tonnes recorded in the quarter ended March 30, 2016. Although some capital projects worth US$59 million that were planned for the year to June 30 were indefinitely deferred due to cash constraints and soft metal prices, the implementation of Ngezi Phase 2 expansion is well underway.
Already, US$453 million has been sunk in the project. An estimated US$22 million was spent on the refurbishment of Selous Metallurgical Complex base refinery. In addition, redevelopment of Bimha Mine, which collapsed on July 18, 2014, is reportedly on schedule and is set to reach full production in April 2018.
Sweating for foreign investors
Government believes that the bulk of local mining companies are sweating for foreign investors.
For example, royalties paid to Government in the June quarter fell 5 percent to US$3,2 million from US$3,4million in the March quarter as revenue tanked.
Also, it is generally felt that by listing in Australia, it becomes relatively easier for foreign investors to participate in Zimplats stock trade than it is for locals.
With the exception of Falgold, Hwange Colliery Company, Bindura Nickel Corporation and Rio Zim, some of the country’s biggest mining companies are not listed on the Zimbabwe Stock Exchange (ZSE).
Metallon Gold Zimbabwe, which owns five local mines — Arcturus, Mazowe, How Mine, Redwing and Shamva — is the country’s largest gold producer, contributing to more than 30 percent of annual national output, but is not listed on the ZSE.
However, its parent Metallon Corporation is listed on the Alternative Investment Market (AIM) of the London Stock Exchange (LSE).
Similarly, Mimosa, the country second-biggest platinum producer, used to be indirectly listed on the Johannesburg Stock Exchange (JSE) through its parent Aquarius Platinum, which has since been brought under the control of another JSE-listed company, Sibanye Gold.
But the proposed Mines and Minerals Amendment Bill that was gazetted by Government recently seeks to outlaw giving mining rights or title to public companies unless the majority of its shares are listed on the securities exchange in Zimbabwe.
Mining is central to the local economy as it contributes more than 50 percent of export revenues. Chamber of Mines of Zimbabwe statistics show that its contribution to gross domestic product fell to 9 percent in 2015 from 9,2 percent in 2014. Since the beginning of the year, there have been some noticeable recoveries.
Official statistics show that the country earned US$806 million from mineral exports in the first six months of the year, an increase of more than 8,8 percent over the same period in 2015.
