zimplats warns survival 'under threat'

Another miner to watch.


AAP

Zimplats Holdings Ltd says its survival is under threat following a fall in metal prices over the past four months and it is trying to raise cash to complete a critical mine development project in Zimbabwe.

Zimplats, which produces platinum from the Great Dyke mineral range in southern Zimbabwe, said it had not been able to generate enough cash to complete an expansion project at its Ngezi mine due to the metals price fall.

It has forecast a "significant" earnings loss and cash shortfall for the half year ending December 31, unless prices recover.

"Shareholders are advised that due to the significant fall in metal prices since mid July 2008, your company's short term viability and survival are under serious threat," it said in a statement dated December 10 and lodged with the Australian Securities Exchange on Thursday.

"At prevailing metal prices, your company is not able to generate sufficient cash to meet its on-going operational needs, as well as the requirements of the Ngezi Phase 1 expansion project, which is now at a critical stage of implementation."

Zimplats said it was imperative the project was completed because it would lower its cost structure and allow it operate profitably in future.

"Shareholders are further advised that despite the cost saving and cash preservation measures being implemented, it is forecast that your company will record a significant loss and cash shortfall for the half year," it said.

"Unless there is a dramatic recovery in metal prices, the same would apply for the year to 30 June 2009."

Zimplats said its operating subsidiary, Zimbabwe Platinum Mines (Private) Ltd, will seek additional debt funding to meet the projected cash shortfall.

"Efforts are currently under way to raise the additional funding from off-shore financiers, an exercise not without its risks," it added.

Without the funding, Zimplats will not be able to complete the Ngezi Phase 1 expansion project as scheduled in 2009.

Zimplats said while management are confident the company can service the increased debt, the current state of credit markets are a concern.

"In view of the above, shareholders are advised to continue to exercise extreme caution in their share dealings," it said.

Zimplats shares ended on Wednesday at $5.50.