Zimplats Shares Down 25% This Year as Production Drops and Costs Rise

Zimplats shares (ASX:ZIM) are 1.84% lower at A$17.11 today, deepening a year-to-date decline that has now reached 25.61% as the platinum group metals producer grapples with a reduction in output and spiralling unit costs during the March 2026 quarter.

The Zimplats share price has shed more than a quarter of its value since the start of 2026, yet sit a little over 11% off the lows hit in late March. Markets have perhaps unsurprisingly responded poorly to the combination of weak near-term earnings visibility and the absence of dividend support, two factors that historically underpinned the stock’s appeal to income-focused portfolios.

What Was Reported?

The March 2026 quarterly report laid bare the scale of the operational challenges. Final 6E metal production collapsed to just 76,340 ounces, down 56% from the previous quarter and 46% below the same period last year. The slump was driven primarily by planned maintenance work on the smelter, which curtailed processing capacity even as mined volumes held relatively steady.

Mined volumes came in at 2.09 million tonnes, down a modest 1% quarter-on-quarter but up 17% year-on-year, suggesting the ore body and mining operations remain fundamentally sound. Concentrator throughput reached 1.93 million tonnes milled, down 6% from the prior quarter but up 15% year-on-year. The decline in milling was attributed to fewer operating days and planned maintenance shutdowns at the mills.

The real pain point emerged in the cost structure. Operating cash cost per 6E ounce surged to US$1,299, a 29% jump from the previous quarter and 27% higher than a year earlier. Total operating costs of US$166.2 million were down just 2% quarter-on-quarter but up 22% year-on-year, reflecting higher open-pit activity, increased export fees, and rising labour and maintenance expenses.

With production down sharply and costs rising, the company opted not to declare a dividend for the quarter, a decision that marks a departure from its historical willingness to maintain payouts even during weaker periods. The move underscores the pressure on free cash flow as the business navigates a capital-intensive phase while managing margin compression.

Zimplats reported one lost-time injury during the quarter, ending a run of several quarters without such incidents. Management emphasised that corrective actions have been implemented as part of the company’s ongoing zero-harm safety focus.

On a more constructive note, the company confirmed that concentrate stocks have built up during the smelter maintenance period and are expected to be processed by the end of FY2026. This suggests a potential catch-up in metal production and revenue in the coming quarters, provided the smelter returns to normal operating rates.

Could Project Pipeline Help Turn Things Around?

Zimplats is midway through a substantial multi-year expansion program designed to lift production capacity and reduce unit costs over the medium term. The Mupani mine expansion remains on track for its 2029 production target of 3.6 million tonnes per annum and approximately 309,000 6E ounces annually at full run-rate. Underground fleet expansion is in place, and development work continues as planned.

The smelter upgrade project, now underway, is intended to increase smelting capacity and improve reliability, reducing the risk of the kind of large production swings experienced in the March quarter. Once complete, the upgrade should support more consistent throughput and lower the probability of maintenance-related output hits.

The solar power expansion is another key pillar of the cost-reduction strategy. Phase 1 delivered 35 megawatts of capacity, and Phase 2A is expected to add a further 45 megawatts, bringing total solar capacity to around 80 megawatts by the first half of FY2027. The objective is to lower and stabilise power costs while reducing reliance on Zimbabwe’s national grid, which has been prone to disruption and tariff increases.

Tailings storage and associated infrastructure upgrades are also progressing, supporting longer mine life and reducing environmental and regulatory risk. Collectively, these projects form part of a US$1.8 billion capital program running through 2031, with smelting and solar representing the major remaining milestones after the 2026–2027 period.

What Next

Over the past few years, as platinum group metals prices retreated from post-COVID peaks, revenue fell sharply and profit margins compressed from nearly 60% to around 10–11%. Operating and sustaining costs have not adjusted downward in proportion to weaker prices, leaving the business exposed to margin collapse when either PGM basket prices fall or throughput is disrupted.

The March quarter result has reinforced market concerns that Zimplats is not a low-cost, flexible producer. Any further softness in PGM prices, or additional downtime at the smelter, could push the business towards further margin compression or even losses. This dynamic has contributed to compressed valuation multiples and a tendency for the stock to de-rate sharply when operational wobbles emerge.

At the same time, some point to the company’s strong asset base, long mine life, and visible growth projects as reasons for optimism over a longer horizon. If the smelter and solar projects deliver as planned, and if PGM prices stabilise or recover, earnings could snap back quickly, potentially supporting a re-rating and the resumption of dividends.

The weak March quarter has validated near-term bear concerns around cost inflation and earnings volatility, yet the company’s substantial project pipeline offers genuine levers for higher volumes and lower unit costs by the late 2020s. Markets will demand proof that the concentrate stockpile is being processed as guided, that smelter uptime normalises, and that capital discipline improves before confidence returns, leaving Zimplats shares vulnerable to further pressure until those milestones are met, but offering meaningful potential upside for those willing to look past the current turbulence.