Zimasco, a unit of SinoSteel, will in 2014 start paying $11 million from $96 000 for ground rental and inspection fees following the rise in statutory levies, a company official has said.
The group’s mining executive Reason Mandimika told a visiting parliamentary Portfolio Committee on Mines the recently gazetted mining fees were affecting its chrome mining operations.
“We will pay the new fees only in 2014, as we had paid the other ones already for five years.
“It is a very dramatic increase. We used to pay annual fees of $96 000, but will now pay $11 million. Ground rental has got a huge impact on our cost base,” Mandimika said.
Zimasco, which extracts its chrome ore from the mineral-rich Great Dyke, has a zero base pricing model that works on the principle of cost-plus mark-up as agreed between the parties.
The mark-up is currently at 5%.
Early this year, the government effected a 5 000% hike in mining fees amid an outcry from large firms that argued that this would slow down output. The government has, however, remained adamant the fees will remain in place.
Josephat Zvaipa, Zimasco services director said the Eurozone debt crisis was likely to affect the price of commodities on the international market.
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Europe, in particular Spain and Italy are the country’s largest chrome markets.
The United States according to Zvaipa, which buys the metal for up to $1,14 per pound of ferrochrome, has the highest prices while China has the lowest at $0,96 per unit.
“The stainless steel plants in Spain and Italy are currently operating at 70% capacity and this will affect demand for ferrochrome. We are currently making low margins,” Zvaipa said.
He added that the fact South Africa exports UG2 concentrates to mainly Asian markets — China and Japan — at below market prices is also threatening the survival of the local chrome industry.
UG2 is a by-product of platinum group metal processing.
The Chinese government, through SinoSteel Corporation and Chinese African Development Fund, has 73% shareholding in Zimasco while local institutions account for the remaining stake.
Zvaipa said the mining company had submitted its indeginisation plan to the government in a bid to comply with regulations compelling foreign-owned companies to dispose of 51% shareholding to locals. Zimasco, according to officials, has 1 700 chrome claims which account for 39% of mineral deposits.
