Platinum mining cheaper in Zimbabwe than SA

Ben Davis‚ an analyst at Liberum Capital‚ has however‚ said that the Mimosa mine is "operating normally and profitably under difficult circumstances".

Although some South African platinum miners are scaling down operations and shutting down other projects‚ Zimbabwean platinum miners are expanding operations‚ buoyed by relatively low operating costs. Winston Chitando‚ the managing director at the Mimosa mine said platinum production would rise this year.

"We are expecting to produce 204‚000oz compared with about 202‚000 ounces last year‚ a slight increase due to efficiency improvements‚" said Chitando during a tour of the mine at the weekend.

However‚ the expected increase in output from Mimosa is not likely to lead to a revenue surge‚ with Chitando insisting that operational costs have also risen‚ because of the high cost of consumables and equipment.

Rising costs have hit platinum mining companies at a time when demand for the commodity from major markets - mainly in Europe - have been affected by the global economic slowdown. Worse still‚ surplus production of platinum is likely to have a corresponding impact on prices.

But with the worst now behind them following the foreign-owned Zimbabwe platinum mining companies' forced compliance with the indigenisation policy‚ Mimosa and Zimplats‚ have revealed plans to press ahead with expansion projects.

The expansion projects will boost production beyond current levels although analysts say a favourable environment will be crucial to incentivise this. Zimbabwe has the world's second largest platinum reserves after South Africa.

"Zimbabwe is a relatively cheaper place to mine platinum and the plans are there for the mines to boost their operations. But a favourable environment that does not have political fears and no concerns over arbitrary legislation will promote such expansion plans‚" said Johannes Kwangwari‚ a Harare based analyst.

Chitando said Mimosa was undertaking feasibility studies for the expansion of its operations with "a team looking at the various options to go beyond the current production levels."

Mimosa processes around 7‚400 tons of ore a day. An official explained that only 3% of the mined ore contains platinum group metals although other minerals such as nickel are also found in the processed concentrate.