Zimplats Holdings Limited

ZIM Details

Recent Updates: Zimplats Holdings Limited (ASX: ZIM) is involved in the production of platinum group metals (PGMs) and related metals, such as gold, nickel, gold, copper, silver, and cobalt mined from the Great Dyke in Zimbabwe.

Board Approval for Capex: Recently, the Board of ZIM has sanctioned the capital investment strategy which entails ~US$1.8 billion of budgeted capex for implementing projects during the next 10 years (starting in 2021). These capital projects are anticipated to be funded from ZIM’s internal resources.

Corporate Governance Statement Issued: ZIM recently released the Corporate Governance Statement via Appendix 4G document updated as of 28 October 2021 and approved by the Board.

Q1FY22 (30 September 2021) Results:

• The tonnes of ore mined increased by ~1% QoQ to ~1.808 million in Q1FY22.
• The volumes of tonnes milled declined by ~5% QoQ during the quarter.
• The production of 6E (platinum, palladium, rhodium, ruthenium, iridium, and gold) declined by ~7% QoQ to ~143,061 ounces in Q1FY22. Though on a Y-o-Y basis, the 6E production rose by ~1% on Q1FY21.
• The operating cash costs per 6E ounce produced rose from ~US$655 in Q4FY21 to ~US$680/oz in Q1FY22, up by ~4% QoQ.
• ZIM incurred ~US$0.4 million expenditure on the exploration activity in Q1FY22 and committed another ~US$1.1 million as of 30 September 2021. ZIM undertook mineral resource evaluation and surface diamond drilling on the current projects. These activities have increased ZIM’s geotechnical and geological confidence in its production schedules.

Cash Utilisation from FY 02-FY21, Highlights; (Analysis by Kalkine Group)

Key Risks: ZIM faces the risk of changes in prices of 6E and demand, climate related impacts, continued COVID-19 uncertainty. Forex currencies of Rand (in South Africa) and Dollar (in Zimbabwe) and regulatory delays also pose risks to the business.  

Outlook:

• ZIM expects higher production levels resulting from the ramp-up of the Mupani mine and the ongoing development of the Phase 3A concentrator to expand the production capacity to 0.9Mtpa.
• ZIM is looking at options to expand via another concentrator, mine, smelter, and base metal refinery and simultaneously exploring investment avenues in Zimbabwe.

Stock Recommendation: The stock of ZIM gave a positive return of ~11.82% in the past month and a positive return of ~95.07% in the past year. The stock is currently trading towards its 52-weeks’ high-level band of $28.750. The stock of ZIM has a support level of ~$22.50 and a resistance level of ~$29.490. On a TTM basis, the stock of ZIM is trading at a price to cash flow value multiple of 4.3x higher than the industry (Basic Materials) median of 2.0x, thus seems overvalued. Considering the current trading levels, decent returns in the past month, and the past year, valuation on TTM basis, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $24.970 as of 28 January 2022, 11:59 AM (GMT+10), Sydney, Eastern Australia. 

ZIM Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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