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ZIMASCO (PRIVATE) LIMITED

versus
ZIMBABWE REVENUE AUTHORITY

HIGH COURT OF ZIMBABWE

MUSITHU J
HARARE, 14 February 2024 & 2 September 2024

Opposed Application-declarator mining royalties

Adv T. Mpofu, for the applicant

Mr S. Bhebhe, for the respondent

MUSITHU J: The applicant is mining company incorporated in accordance with the

laws of Zimbabwe. The respondent is a statutory entity established in terms of the Revenue
Authority Act1, with the mandate to collect State revenues including mining royalties. The
applicant seeks a declaratur and other consequential relief as set out in the amended draft order.
The applicant is in the business of mining chrome ore and disposing it either as chrome ore
concentrates or high carbon ferrochrome. Primarily, the applicant wants the court to declare
that chrome ore concentrates and ferrochrome are ‘mineral bearing products’ which do not
attract mining royalties on their disposal. The application was opposed by the respondent who
insists that the products are in fact minerals and therefore attract liability for mining royalties.

THE APPLICANT’S CASE

The applicant’s case as stated in its papers, is as follows. It is in the business of mining
and smelting of chromite ore to produce high carbon ferrochrome. It has a production capacity
of over 200 000 tonnes of high carbon ferrochrome annually accounting for about 1% of global
ferrochrome production. The applicant has chromite mining locations in areas such as
Zvishavane, Shurugwi, Guinea Fowl, Lalapanzi, Mhondoro Ngezi and Mutorashanga. The
applicant also has tributor mining operations along the Great Dyke of Zimbabwe. The tributors
carry out the mining operations from the applicant’s mines.
The applicant’s ferrochrome smelting operations are situated at Kwekwe. Most of the
applicant’s chromite ore is mined and transported to Kwekwe where it is smelted in

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combination with reductants and fluxes to produce high ferrochrome alloy. Ferrochrome is
therefore not acquired from the earth nor is it formed by a geological process, but it is man
made. According to the applicant, some of the chrome ore does not go through the smelting
process, but rather it goes through a washing plant and is exported in raw form as chrome ore
concentrates. The ferrochrome and chrome ore concentrates are transported by rail to Maputo
or by road to Beira in Mozambique from where they are shipped to various buyers in Europe,
the far East and the United States of America. The smelter produces a high carbon ferrochrome
product with an annual production capacity of 200, 000 tonnes.
The Operational Cycle, Raw Material Preparation and Planning, Marketing and Logistics
According to the applicant, chrome ore, fluxes, coke and coal are delivered by rail and
road and once sized, are placed in raw material storage bunkers. Weighing Conveyer Belt
Systems produce a furnace blend which is stored in furnace holding bins, prior to being fed
into the furnace to produce saleable ferrochrome alloys.
The ferrochrome and chrome ore concentrates are transported by rail to the ports of
Maputo and Beira in Mozambique. From the Kwekwe Smelter/Mutorashanga Kildonan siding,
material is loaded onto National Railways of Zimbabwe (NRZ) wagons and transported to
Chicualacuala, at the Zimbabwean border with Mozambique. From that point, the Mozambican
Railways, Portos E Caminhos De Ferro De Mocambimbique, E.P., (CFM) takes over and pulls
the wagons through to Maputo from where it is shipped to various world markets. The
applicant’s key post-production service providers in the supply chain are:
➢ National Railways of Zimbabwe (NRZ), which is the inland transporter of material
from the plants to the Chicualacuala border.
➢ Portos E Caminhos De Mocambique, EP (CFM), being the inland transporter of the
material from Chicualacuala border to the Ports of Maputo and Beira in Mozambique.
➢ Manica Freight Services (Private) Limited (Manica), which is the cargo agent for all
material going through the Maputo Port.
➢ Terra Mar Logistica Limited (Terra Mar), the cargo agents for all material going
through the Beira Port.
➢ Cornelder De Mocambique SA (Cornelder), the port operator in Beira where ships load
material from.
➢ Maputo Development Company (MPDC), the port operator in Maputo where ships load
the applicant’s ferrochrome and chrome ore concentrates from.
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➢ Sampling and analysis companies, which provide sampling and analysis of the
ferrochrome and chrome ore concentrates to determine the quality of the product.
➢ Various Shipping Lines which provide the ocean freight transportation of ferrochrome
and chrome ore concentrates from the Ports of Maputo and Beira in the export
destinations.
➢ Agents in export destinations receive the ferrochrome and chrome ore concentrates and
engage inland transporters in the export countries to transport them to the buyers/end
users.
➢ Insurance companies who insure the products in transit from Zimbabwe to the export
destinations.
➢ Other service providers such as SHeltam that also provides the applicant with
locomotive hirage services for inland movement of concentrates and ferrochrome to the
borders enroute to loading ports of Maputo and Beira. There are also Huzhou
Chuanqian and Loyal Crown who are road transporters who move concentrates from
Kildonian Siding to Beira Port.
The Relevant Agreements
The applicant has several agreements with some service providers that facilitate the
transportation and the sale of its products. These are summarised hereunder as follows.
➢ Agreement with Portos E Caminhos De Mocambique, EP and National Railways of
Zimbabwe
The agreement was signed sometime in 2017 between the applicant, CFM and NRZ.
The two service providers ferry the applicant’s products from Kildonan and Kwekwe to
Maputo or Beira ports in Mozambique.
➢ Agreement with Manica Freight
The agreement was entered into on 19 June 2019 for the period 1 January 2019 to 31
December 2021. The agreement requires Manica to provide agency/brokerage services in respect
of shipping, clearing and forwarding of cargo and consignments of ferrochrome and chrome ore
concentrates belonging to/or consigned by the applicant whilst such consignments are in transit
in Mozambique from Zimbabwe. Such cargo is stockpiled at Maputo Ferro Dump prior to
shipment to the final destinations. Another agreement between the same parties was signed on
28 October 2021 for the period 1 January 2022 to 31 December 2022.
The services to be provided by Manica as set out in clause 2 of both agreements
included the procurement of licences, permits and approvals necessary for the cargo while
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transiting Mozambique as required by that country’s laws. Manica would then be remunerated
by the applicant for the services rendered. In terms of clause 7.1 of both agreements, CFM would
invoice Manica for the services rendered to the applicant at the prevailing rates and those
applicable at the time of signing the agreement. In terms of clause 7.2 of both agreements, the
MPDC handling, and storage charges would be invoiced by MPDC to Manica on behalf of
ZIMASCO, based on the agreement between MPDC and the applicant. In terms of clause 7.3 of
the 1 January 2022 to 31 December 2022 agreement, CFM railage charges would be invoiced
by CFM to Manica on behalf of the applicant based on the agreement between CFM and the
applicant.
➢ Agreement with Terra Mar Logistica Limited (Terra Mar)
The agreement was signed between the parties on 1 September 2022 for a period of 12
months. Terra Mar was to provide agency/brokerage services in respect of the shipping, clearing
and forwarding of cargo shipments of ferrochrome/concentrates belonging to and/or consigned
by the applicant. Terra Mar would invoice the applicant for the services rendered.
➢ Contract with Cornelder De Mocambique SA for Beira Port Services
The contract was entered into on 1 September 2020, for the year 2020. It was for the
storage and handling of chrome at the port of Beira. Cornelder undertook to offload
wagons/tracks, weigh the chrome, stockpile it, load it into skips, stevedore and pack it into
containers, and provide adequate security within the port for the protection of the applicant’s
chrome. All relevant charges associated with the handling and storage services would be paid by
the applicant through its nominated cargo and shipping agents.
Another contract was also signed for the period July 2021 to June 2022. Previous
periods were also covered by similar contracts.
➢ Cargo handling agreement with the Maputo Port Development Company
The cargo handing agreement with Maputo Port Development Company SA (MPDC)
was entered into on 19 August 2019. The agreement commenced on 1 January 2019 and
terminating on 31 December 2023. MPDC undertook to receive the road trucks and/or rail
carrying the applicant’s mining products and to transport the products to vessels for loading.
MPDC would be remunerated for the services in terms of clause 23 of the contract.
➢ Contracts with sampling and analysis companies
Specialist of sampling and analysing the applicant’s products to determine their quality
were provided by the companies that the applicant contracted with. The applicant paid the
companies for the services rendered.
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➢ Shipping Contract with G2 Ocean AS

On 25 May 2021, the applicant entered into a shipping Stemmor Charter Party (1983)
contract with G2 Ocean AS, the owners of a cargo ship known as ‘Ozgur Aksoy’. The Charter
Party was for shipping of the applicant’s 10 000 tonnes of chrome ore (cargo) from the port of
Beira (port of loading) to its destination (Port of Xingang). The freight charges were set at
US$49 per metric tonne.
➢ Shipping Contract with Ultrabulk Services
The Stemmor Charter party contract was entered into with Ultra Bulk African Services, the
owner of a cargo ship known as ‘Ultrabulk TBN’ on 22 January 2022. The contract was for
the shipment of between 5 000-5 300 metric tons of chrome ore concentrates. The freight
charges were US$35 per metric tonne.
Over and above those agreements listed above, the applicant also had insurance,
marketing and distribution agreements and supply and purchase agreements with several other
service providers.
The Dispute
According to the applicant, the respondent conducted a review of the applicant’s tax
affairs, and claimed that from 2019 to 2022, the applicant used an incorrect formular in
calculating royalties by basing them on the ex-work value which excluded distribution costs.
The position was communicated through a letter from the respondent to the applicant dated 8
December 2022. According to the respondent, the use of the ex-works value was incorrect
because s 37 of the Finance Act required that mining royalties be calculated based on the face
value of the invoice. The letter from the respondent concluded with the recalculation of the
mining royalties for the period 2019 to September 2022, and the imposition of a 100% penalty.
The recomputed outstanding royalties together with the penalties added up to ZWL 604 922
007.31 and USD 7 052 406.64.
The applicant responded to the respondent’s letter through its own letter of 13
December 2022, in which it disagreed with the respondent’s findings, arguing that it had
correctly calculated and paid the mining royalties. In its response, the applicant averred that:
royalties should not be calculated on transport and logistics costs; the ex-works value is the
face value of the invoice since the invoice clearly showed what would be due to the applicant
and what would be due to the other logistics parties; the payment of withholding tax on selling
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commission payable to selling agencies clearly confirmed that the amount was not for the
account of the applicant; the latest correspondence from the RBZ received on 17 November
2022, confirmed that the RBZ no longer required the applicant’s forex surrender portion to be
based on gross sales value but ex-works value.
On 16 December 2022, the respondent dispatched a letter to the applicant explaining
its position on royalties as follows: its position as set out in its earlier letter of 8 December 2022
remained unchanged; that s 37(9) of the Finance Act required that royalties be calculated on
the ‘gross sales value’ without any deductions being made; that the respondent’s position was
not arrived at based on the RBZ retention threshold, but by reference to pieces of legislation.
The letter concluded with a demand for a payment plan for the outstanding royalties.
The parties further exchanged correspondence culminating in the applicant’s letter of
7 February 2023 in which the applicant explained its position as follows: the gross fair market
value of the mineral produced is the ex-works value; this position was supported by the
government requirement that all chromite ore concentrates be exported ex-works; the applicant
had an exemption from selling ex-works but rather FOB through the ports of Maputo and Beira;
the difference between the FOB price and ex-works was the cost incurred for transporting the
cargo to various destinations; costs of logistics did not add up to the gross fair market value of
the chromite concentrates in the hands of the applicant; ex works was the same basis that all
other exporters used in the payment of royalties; that the penalty should be waived because the
applicant sought an advance tax ruling about two years back seeking clarification on the issue,
but the respondent had refused to issue the ruling.
Further engagements did not yield positive results with the respondent maintaining its
position on the matter. The respondent went on to increase the penalty from 20% to 200%,
contending that the initial penalty of 20% was an error as the respondent was not authorised to
waive the primary civil penalty. The respondent dispatched further correspondences with
revised computations amounting to ZW 881 544 511-00 and USD 10 523 347.00. The
respondent had since collected the sums of ZWL 389 606 502. 95 and USD 2 485 183.83,
through set off from any amounts due to the applicant by the respondent as value added tax
(VAT) refunds and was likely to continue doing so.
According to the applicant, the Finance Act of 2020 made some amendments to Chapter
VII of the Finance Act by repealing ss 37 and 37A. The repealing provision had retrospective
application, with effect from 1 January 2010. The Finance Act provided for the collection of
mining royalties by agents on behalf of the Commissioner General of the respondent. The rates
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at which the royalties were to be collected were provided for in the Finance Act. The schedule
to Chapter VII (section 37) in the Finance Act set out the royalty rates as fixed in s 245 of the
Mines and Minerals Act (the Act) as a “a percentage of gross fair market value of mineral
produced”. The royalty on some minerals was imposed in terms of the Act, as read with s 37
of the Finance Act.
The applicant attacked the respondent’s position on the law as set out in its letter of 24
March 2023. It averred that in the letter the respondent had correctly stated that ss 244 and 245
of the Act were the principal legislation that governed the calculation of royalties. In terms of
the two provisions, royalties were paid on minerals and mineral bearing products. The
respondent went on to state that royalties were still payable whether the mineral was sold in its
pure form or semi processed or contained in some other minerals, as they were calculated on
the mass of the mineral therein by applying the relevant rate. The respondent further contended
that the actual calculation of the royalties was based on rates that were promulgated in terms
of ss 37 and 37A of the Finance Act. These required that royalties be ‘calculated based on the
face value of the invoice. The face value of the invoice is the price as shown on the face of the
invoice and no adjustments need to be done to that value’.
According to the applicant, the respondent’s contention was that s 37(9) of the Finance
Act was conceived after a realisation that some taxpayers were quoting invoice values that were
below the gross fair market value and were also deducting beneficiation and further production
costs. The respondent’s contention was that the term ‘fair market value’ referred to the price at
which the mineral was sold in a marketplace and that in the applicant’s case, it referred to the
price at which the chrome and ferrochrome were sold in the Chinese market. The use of the
term ‘gross’, clearly showed that no deductions were to be made to the fair market value.
Section 37(9) was promulgated to clear any doubt regarding the non-deductibility of costs from
gross market value. From 2019 to 2021, the applicant was legally supposed to calculate
royalties based on the gross fair market value. The respondent also averred that in terms of s
37(5) of the Finance Act, the Commissioner had no discretion to reduce or waive the primary
civil penalty. The penalty of 20% that it had previously imposed was an error and had been
replaced with a 200% fine, which it claimed was provided in the legislation.
The applicant posits that the respondent’s interpretation of the law was incorrect for the
following reasons. There was a distinction between minerals and mineral bearing products, and
no royalty rates were fixed by the Minister for mineral bearing products before 1 January 2022.
Royalties should be calculated on the gross fair market value of the mineral produced. The
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gross fair market value was not the selling price but the ex-works value, which excluded
distribution costs. The face value of the invoice was not the selling price on the invoice. The
applicant further explained these contentions in more detail as follows.
No royalties were fixed for mineral bearing products prior to 1 January 2022
The applicant contended that no royalties were fixed for mineral bearing products
during the period before the Finance Act 7 of 2021 introduced s 37B. Royalties were only set
for minerals. This position was supported by legislation which made a distinction between
minerals and mineral bearing products. Further, recent legislative developments in respect of
platinum group metals introduced royalties on Matte and Concentrate which were mineral
bearing products.
Legislation made a distinction between minerals and mineral bearing products
The applicant claimed that it produced chromite ore concentrates and ferrochrome,
which were ‘mineral bearing products’. There were no royalties charged on mineral bearing
products such as chromite ore concentrates or ferrochrome. Chromite ore concentrates required
further downstream beneficiation and refinement before the product reached the stage where it
constituted a mineral. Chromite ore was therefore simply a natural mineral bearing product.
Ferrochrome on the other hand was a man-made mineral bearing product. It was a
manufactured product produced by blending chromite ore and other raw materials that went
through a smelter to produce an alloy. The respondent’s case was that royalties were charged
on both minerals and mineral bearing products. Royalties were therefore payable on both
chrome ore concentrates and ferrochrome.
The applicant contended that there was clear distinction between ‘minerals’ and
‘mineral bearing products’. Both the Finance Act and the Act did not define the words ‘mineral
bearing products’. The applicant averred that the words ‘minerals or mineral bearing products’
were used in various parts of the Act, especially Part XIV, which dealt with the fixing of royalty
rates. The word ‘or’ was used to delineate alternatives as opposed to ‘and’, which was used to
connect words that were to be considered jointly. The applicant further contended that the
Schedule to Chapter VII (section 37) only fixed rates for minerals such as platinum, chrome
and gold, and not mineral bearing products.
The applicant averred that recent legislative developments further supported the
submission that no royalties were fixed for mineral bearing products prior to 1 January 2022.
Following the promulgation of the Finance Act 7 of 2021, the basis for calculating royalties
for Matte and Concentrate were included for the first time in the law. The inclusion of the value
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on which royalties for Matte and Concentrate were to be calculated only took effect from 1
January 2022. The applicant argued that if it was the legislature’s intention to fix royalty rates
for mineral bearing products such as Matte and Concentrate before 1 January 2022, then it
would have retrospectively applied the Finance Act 7 of 2021. Further, in the case of chrome
ore concentrates and ferrochrome, the legislature would have promulgated similar legislation,
if it intended to impose royalties on those mineral bearing products. The applicant contended
that even though it was not legally obliged to pay royalties on the disposal of both chromite ore
concentrates and ferrochrome, it reasonably calculated royalties and paid them to the
respondent in good faith.
The applicant averred that should the court find that royalties were payable on the
chrome ore concentrates and ferrochrome, then its alternative argument was that the royalty
rates should be calculated on the gross fair market value of the mineral produced and not on
the face value of the invoice.
The applicant averred that it made no deductions in calculating gross fair market value
of the mineral produced. It further averred that s 37(2) of the Finance Act did not set out the
formula for the calculation of royalties. All it did was to impose an obligation on the persons
mentioned therein, who as agents of the Commissioner General, were obliged to deduct
royalties based on the face value of the invoice. Section 37(2) was a tax administration
provision for the collection of royalties. A deduction was simply the act of subtracting or taking
away something, in this case, a computed royalty amount. Further, s 37(2) did not provide that
the royalty was a percentage of the face value of the invoice. If the legislature intended that the
royalty amount be a percentage of the face value of the invoice, then it could have stated so.
The applicant averred that the face value of the invoice had been used in the provision
for convenience and not as a substitute for gross fair market value. The invoice was a
convenient reference for agents mentioned in the section such as financial institutions who
would not know the gross fair market value of the mineral produced. The gross fair market
value of the mineral was known by the miner who was obliged by s 251 of the Act to file a
return.
According to the applicant, even if royalties were calculated as a percentage of the face
value of the invoice, the term face value of the invoice did not mean the selling price written
on the invoice but meant the value appearing on the face of the invoice, ascertainable without
reference to extrinsic factors. In the case of the applicant, the face value of the invoice was not
the selling price, but the ex-works value. So, even if the respondent’s reliance on the face value
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of the invoice as the base on which the royalty rate was applied were correct, that face value
was not the selling price, but was still the ex-works value.
Further, according to the applicant, the calculation of the mining royalties was done in
terms of the schedule to Chapter VII (section 37) in the Finance Act (referred to in s 37(1) of
the Finance Act), which set out the royalty rates as fixed in s 245 of the Mines and Minerals
Act as a percentage of gross fair market value of the mineral produced. Section 245 (1) of the
Act was clear that the rate of royalty payable in terms of s 244, should be fixed in the schedule
to Chapter VII of the Finance Act. The Schedule to Chapter VII set the rate as a percentage of
the gross fair market value of mineral produced. This was the formula for the computation of
royalties. To compute the royalties due, one had to apply the stipulated percentage to the gross
fair market value of the mineral produced which has been disposed.
The term ‘gross market value’ was not defined in the Finance Act. The most widely
used term was the ‘fair market value’, which had been interpreted to mean the hypothetical
price that a seller was willing to accept, and a buyer was willing to pay on the open market and
in an arms-length transaction. The term ‘gross’ simply meant before or without diminution or
deduction. It was used in that sense, as an opposite of ‘net’. The applicant contended that the
‘gross fair market value of the mineral produced’ did not include the post production costs
such as distribution costs. When these costs were included on the purchase price paid by the
buyer, such costs were charged on the buyer over and above the gross fair market value of the
mineral produced.
The applicant further averred that since royalties were charged on the gross fair market
value of the of the mineral produced and not that of a mineral that had been produced and
distributed, the post production costs incurred in distribution were excluded to arrive at the
‘gross fair market value of the mineral produced’. The fact that the price charged to the buyer
was inclusive of distribution costs did not necessarily mean that distribution costs formed part
of the production costs. When the applicant excluded the distribution costs from the price
charged to the buyer, that was not a deduction from the gross fair market value of the mineral
produced, but a deduction from the all-inclusive selling price charged on the distributed
product. In any case, s 37(9) of the Finance Act only prohibited the deduction of beneficiation,
processing or other costs whatsoever ‘incurred in the production of the mineral concerned’. It
did not cover or deal with postproduction costs such as distribution costs as they were not
incurred in the production of the mineral.
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The applicant further averred that in determining the ‘gross fair market value of the
mineral produced’, s 37 (9) did not prohibit the deduction from the selling price of any post
production costs incurred. It followed that where the miner charged an all inclusive selling
price, it was not prohibited from deducting post production costs from the selling price when
determining the ‘gross fair market value of the mineral produced’. The word ‘produce’ meant
to bring a thing into existence from its raw materials or elements, in order to give rise or effect
to something. In the case of a miner like the applicant, ‘produce’ meant the process of
extracting the mineral from the earth and beneficiating it to a certain state or condition before
being distributed to buyers. Costs incurred in that process before distribution to the buyers were
costs incurred in the production of the mineral and any distribution costs were not part of those
costs. For that reason, no deductions, as contemplated in the section would have been made by
the applicant from the gross fair market value of the mineral produced.
The applicant contended that for purposes of computing royalties, the legislature had
chosen a particular stage in the value chain at which the gross fair market value should be
ascertained. The stage chosen by the legislature for measuring the gross fair market value was
the end of the production process, when the material had been produced. The applicant further
contended that the gross fair market value of the minerals produced by it should be ascertained
at the end of the applicant’s production processes, that is when the mineral products were
stockpiled awaiting to be loaded on the NRZ rail wagons. Every other activity or stage that
occurred post that stage was not a production process activity but were post production
activities. Any costs incurred after the mineral products were stockpiled soon after production
were not production costs but distribution costs and did not form part of the gross fair market
value of the mineral produced.
The applicant further averred that the relevant price was the price that would have been
agreed between a willing buyer and a willing seller of the minerals on site after production was
completed. Soon after production the mineral products had a gross fair market value. It was
that gross fair market value on which royalties were payable in terms of the Act. The gross fair
market value of the minerals produced by the applicant could be arrived at by excluding all the
additional production costs incurred in delivering the minerals to customers. The applicant
averred that it could not have been the intention of the legislature to charge royalties on post
production costs incurred in delivering the minerals to customers. Had that been the intention,
the legislature would have charged royalties, not on the gross fair market value of the minerals
produced, but on the ‘selling price’. The selling price was an all-inclusive term which in this
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case would have included the post production costs incurred by the seller to deliver the mineral
to the export destinations.
The applicant contended that it would be against accepted principles to charge a royalty
on the price charged on a mineral product that had been produced and delivered. It would not
have been the intention of the legislature to impose such a royalty. In any event, the gross fair
market value of the mineral produced was a term that had no extra-territorial application to
refer to export markets, since that value had to be ascertained soon after production in
Zimbabwe.
As regards the primary civil penalty, it was averred that s 37(5) of the Finance Act
imposed a primary civil penalty if the person responsible for deducting royalties had failed to
remit the royalties deducted in terms of s 37(1) timeously, as envisaged in s 37(3). The applicant
averred that no penalties would be payable if the court found in favour of the applicant.

THE RESPONDENT’S CASE

The respondent carried out an audit into the tax affairs of the applicant and discovered
that the applicant produced chrome ore concentrates and ferrochrome which it sold to the
Asian, American and European markets through sales agents. The sales agents were Sinosteel
International and Traxys Far East, responsible for the Asian markets, Chromium Trade
responsible for the European market and Traxys North America responsible for the American
markets. The sales agents in the respective jurisdictions would sell the chrome based on the
market value of the chrome in those markets for a commission. The applicant was selling
minerals mined in Zimbabwe and was therefore liable to pay royalties on such sales.
Before 2019, the applicant correctly calculated mining royalties by applying the royalty
rate on the market value of the mineral sold and remitted the royalties to the respondent. The
applicant did not properly account for the royalties due for the period 1 September 2019 to 30
September 2022. The applicant stopped using the correct method of calculating royalties based
on the market value of the chrome and ferrochrome and started deducting some costs, including
distribution costs from the gross selling price to arrive at what it called the ex-works value. The
royalties were then calculated on the resultant figure.
On 16 April 2021, the applicant wrote to the respondent requesting an Advance Tax
Ruling on whether mining royalties should be paid on ferrochrome produced and the base upon
which the mining royalties should be calculated. The respondent responded to the request on
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14 May 2021, advising that since the issue was already under audit, the request was not
accepted in terms of para 3 of the 4th schedule to the Revenue Authority Act2.
On 11 August 2022, the respondent requested the applicant to submit copies of the final
customers’ sales invoices and sales contracts considering that the applicant first consigned
goods to its sales agents using proforma invoices. The requested sales invoices were submitted.
The applicant was also requested to submit schedules showing how mining royalties were
calculated, through an email of 30 September 2022. The applicant submitted the schedules in
excel format showing the invoice value as shown on the invoice, which was used to compute
the mining royalties, the sales commission, the finance charges and the calculated mining
royalties.
An analysis of the submitted sales schedules showed that the applicant calculated
mining royalties based on ‘ex-works value’. This figure was arrived at after deducting the cost
of transport, insurance, sales commission, finance charges and other costs from the invoice
value. The invoice value was the price at which the mineral was sold in the respective markets.
It was also termed the gross fair market value, considering that the sales value was similar to
the price of the products in the respective markets. This prompted the respondent to make
necessary adjustments and calculate the mining royalties based on the gross fair market value
for the period September 2019 to December 2021. The respondent averred that this was in line
with the schedule to Chapter VII of the Finance Act which required that mining royalties be
calculated based on the gross fair market value of the mineral.
The respondent also calculated mining royalties on sales of chrome ore concentrates
and ferrochrome for the period from 1 January 2022 to 30 September 2022 based on the invoice
value. This was in line with s 37B(c) of the Finance Act which was introduced by the Finance
Act No. 7 of 2021, with effect from 1 January 2022. On 8 December 2022, the respondent
dispatched a letter to the applicant showing the principal tax shortfalls of ZWL308, 635, 048.84
and USD 4, 953, 284.75. The applicant responded to the letter on 13 December 2022. Issues
raised by the applicant were attended where it was necessary. Schedules were adjusted, the
penalty was reduced from 100% to 20%. This position was communicated to the applicant
through a letter of 16 December 2022.
On 20 December 2022, the applicant was served with notices of assessment for the
income tax debt and schedules for withholding taxes and mining royalties. The applicant made

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further representations requesting a penalty reduction, and further arguing that the calculation
of royalties based on the ex-works value was a true representation of the gross fair market value
and therefore it had properly calculated mining royalties based on that formula. The respondent
replied reaffirming its earlier position on the matter.
On 7 February 2023, the applicant wrote to the respondent requesting that the issue of
the base upon which royalties were calculated and that of the penalty be escalated to the
Commissioner Revenue Assurance. By another letter of 14 February 2023, the applicant
submitted yet another letter highlighting areas that needed to be adjusted whilst engagements
with the Commissioner Revenue Assurance were underway. The applicant also submitted a
payment plan. The Commissioner wrote to the applicant on 24 March 2023, advising that the
legislation required that mining royalties be paid on the gross fair market value and the
respondent had therefore made the necessary adjustments. The Commissioner also adjusted the
penalty to 200% in line with the requirements of s 37(5) of the Finance Act. The amended
schedules for mining royalties were submitted to the applicant on 24 March 2023.
Further engagements between the parties failed to resolve the deadlock, culminating in
the present proceedings before this court.
As regards the merits, the respondent denied that the ferrochrome was a man made
product. It averred that ferrochrome was a product of the beneficiation of chrome ore to remove
impurities and extract chrome metal from the oxide. Ferrochrome was therefore a mineral
bearing product.
The respondent also denied that the ex-works value on which the applicant was
calculating royalties was the same as the gross fair market value. The gross market value was
the value on which the mineral was sold in a particular market, whereas the ex-works value
was the value of the mineral after excluding the costs of distribution. Chapter VII required that
mining royalties be calculated on the gross fair market value of the mineral produced.
According to the respondent, the applicant’s argument that royalties should not be calculated
on transport and logistics costs was not supported by the law. After deducting transport and
logistics charges, the figure on which royalties were then calculated ceased to be the gross fair
market value of the mineral produced. The ex-works value was not reflected on the face of the
invoice considering that it was arrived at after deducting logistics charges and other charges
incurred on behalf of the applicant and withheld at source. The face invoice value was the price
displayed on the invoice showing the price at which the mineral was sold. The ex-works value
would be a net value as opposed to the gross fair market value.
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According to the respondent, royalties enabled the country to get a share of the finite
resource. Such royalty could be in the form of the mineral itself being set aside and delivered
to the sovereign who would sell that share at its own time. Alternatively, the sovereign could
allow the miner to sell the mineral and remit part of the proceeds that represented the royalties
to the fiscus. The royalty amount belonged to the fiscus. In the present matter, the sovereign
had made it clear that its share would be a percentage of the gross amount realised on the sale
of the mineral. No deductions were contemplated. Any deductions were for the account of the
miner in the sense that they were made from the share of the miner which was the larger share
anyway.
The respondent averred that while the Act made a distinction between a mineral and a
mineral bearing product, the Finance Act No. 8 of 2020, which was applicable herein did not
make such distinction. The legislature decided not to have a royalty rate that considered the
fact that a mineral was not yet refined. Rather, it was considered that even if the mineral was
not yet refined, it was still a mineral that should be levied royalties on the same footing with a
mineral that was refined. This position had been made clear in the Minister of Finance’s
statement that preceded the Finance Act No. 7 of 2021. The gross fair market value of a mineral
was the price of the mineral on the international market. No deduction of distribution costs was
permissible. The invoice value was the amount which was displayed on the face of the invoice
as the value upon which a product or a good had been sold. There was no need to calculate or
deduce the invoice value.
According to the respondent, the intention of s 37 of the Finance Act was to levy
royalties on the mineral that was contained in the ore body. What that meant was that the miner
was supposed to ignore all the impurities that were still in the mineral. Even if the mineral was
extracted from the earth and was sold in that state, one was required to determine how much
mineral was in the dump and what the value of that mineral was and then calculate royalties
based on the value of the mineral. It was for that reason that s 37(9) was enacted so that there
were no differences in royalties remitted based on levels of processing or beneficiation by
individual miners. The value of the mineral sold by a person who had processed the mineral
and the value of the same mineral which had not been processed would be the same for
purposes of calculating royalties. The applicant’s interpretation of the law was remiss and
would lead to the absurdity where only refined minerals would attract royalties and
unprocessed or semi processed minerals would not.
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The respondent denied that the promulgation of the Finance Act 7 of 2021, which
became effective on 1 January 2022, supported the applicant’s contention that no royalties were
fixed for mineral bearing products. Rather, it confirmed that the respondent’s interpretation of
s 37 prior to the amendment was correct. Prior to the amendment, there was no provision in the
Finance Act providing for lower rates of royalties for ores and concentrates. All royalties were
charged based on the assumption that it was the mineral in the ore that was being levied
royalties on.
According to the respondent, in 2021, certain miners lobbied for concessionary royalty
rates which considered the state of impurity of their minerals in the levying of royalties. The
amendment introduced by the Finance Act 7 of 2021, was a concession by the policymaker that
it would be in the interests of both the sovereign and the miners to have a royalty rate that was
based on a percentage of the gross fair market value of the mineral. The fact that the applicant
and other miners in Zimbabwe were paying royalties all these years when in fact they were not
selling refined minerals showed that they knew what the law required.
As regards the applicant’s alternative remedy, it was averred that it was devoid of merit
and ought to be dismissed. The gross market value of a mineral was the price that minerals
were sold on the international market. There were prices that buyers and sellers generally
agreed to buy and sell minerals with neither being under any compulsion, and both having
reasonable knowledge of the relevant facts. That would be the price reflected on an invoice
issued by the buyer to the seller. A gross fair market value and an invoice value would therefore
be the same. There was no distinction between the basis of calculating royalty in s 37(2) and
that contained in the schedule. Section 37(2) was not read in isolation, but together with the
rest of the provisions dealing with royalties’ calculation and payment.

THE APPLICANT’S REPLY

In its answering affidavit, the applicant insisted that prior to 2019, it was overpaying
royalties by incorrectly calculating them and paying over to the respondent. Through the
incorrect calculations, the applicant therefore paid royalties not only on the minerals produced
by it, but also on the distribution costs incurred in transporting the chromite products from
locations in Zimbabwe to the respective jurisdictions of the buyers. From 1 September 2019 to
30 September 2022, the applicant claimed that it correctly accounted for royalties due in terms
of the law. It ceased to calculate royalties on distribution costs incurred in transporting the
chromite products from locations in Zimbabwe to the respective jurisdiction of the buyers.
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The cost of transport, insurance, sales commission, finance charges and other costs were
not deducted from the face value of the invoice but from the selling price, which was different
from the face value of the applicant’s invoices. The selling prices on the applicant’s invoices
were neither the face values of the invoices nor the gross fair market values of the minerals
produced by the applicant. The respondent’s adjustments of the royalties payable by the
applicant for the period 1 January 2019 to 30 September 2022 were neither based on the gross
fair market value of the minerals produced by the applicant nor the face value of the invoices
or invoice values but on the selling prices contrary to the legislative provisions, including s
37(B) (c) of the Finance Act.
The applicant insisted that royalties were not charged on transport and logistics costs
incurred in the distribution of chromite products. When these costs were deducted from the
selling price, the remaining balance was the gross fair market value of the mineral produced.
The gross fair market value of the mineral produced was not the same as the selling price of
the mineral in cases where the selling price incorporated these costs. The face value of the
invoice was not the same as the price of the goods sold in cases where the invoices showed on
its face, that there were certain costs which were deducted from the selling price shown on the
invoice.
While admitting that there were no deductions that were made from the fair gross
market value of the mineral produced, the applicant averred that in the present matter, the gross
fair market value was not equivalent to the selling price. The selling price charged by the
applicant incorporated post production distribution costs incurred and those distribution costs
were deducted from the gross fair market value of the mineral produced but for the selling
price. The applicant was therefore entitled to deduct from the selling price, all distribution costs
incurred, including sales commission of selling agents. No royalties were chargeable on
distribution costs and the applicant was therefore correct in deducting distribution costs from
the selling price to arrive at the gross fair market value.
The applicant denied that in his budget statement, the Minister of Finance affirmed that
no deductions were to be made. Instead, the Minister was concerned with the deductibility of
production costs when he said: “no beneficiation or processing costs are deductible from the
gross mineral proceeds when calculating mineral royalty payment.” The statement did not deal
with the deductibility of distribution costs incurred in transporting minerals to the buyers. Such
costs were post production costs.
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THE SUBMISSIONS
At the commencement of oral submissions, Mr Mpofu for the applicant applied to
amend the applicant’s draft order by deleting paragraph 8 which was concerned with the
primary civil penalty levied in terms of s 37 of the Finance Act. Mr Bhebhe for the respondent
did not object to the amendment sought, and the draft order was accordingly amended by
consent.
According to Mr Mpofu, the first issue that arose for determination was whether
royalties were payable on minerals or mineral bearing products prior to the Finance Act 7 of
2021. The respondent had to be clear on whether the applicant was selling minerals or mineral
bearing products. Counsel pointed to the contradiction in the respondent’s own case in which
it averred in one breath that the applicant sold minerals, then made a somersault and averred
that ferrochrome was a mineral bearing product and not a mineral.3 Counsel submitted that the
validity of the respondent’s decision depended on the basis on which the decision was made in
the first place. The decision had been made on a contradictory basis.
Mr Mpofu further submitted that before the Finance Act 7 of 2021, the law recognised
the distinction between minerals and mineral bearing products and fixed a royalty rate for
minerals only. The State could not collect revenue unless such collection was in terms of a law
of definite import. In terms of the contra fiscum rule, any ambiguity had to be resolved in
favour of the subject. Counsel further submitted that the use of the disjunctive ‘or’ in s 244(1)
meant that royalties were payable on minerals or mineral bearing products and not on both.
Royalties were only paid to the extent of a rate fixed in terms of s 245 of the Act.
Mr Mpofu further submitted that the rate fixed for minerals could not be transposed for
the rate fixed for mineral bearing products. Had the legislature used the conjunctive ‘and’ then
the same rate would have been applicable to mineral bearing products. It was the schedule to
the Finance Act that limited itself to minerals till the Finance Act 7 of 2021 was introduced.
The legislation fixing rates only did so in respect of minerals and not mineral bearing products.
That distinction was acknowledged by the respondents in its opposing affidavit4. The
respondent acknowledged that the applicants were selling minerals. It also acknowledged that
s 37(2) was only limited to minerals, and it was only the new s 37(B) which then did away with
this distinction. The previous rate only applied to minerals. No rate was charged on mineral

3
Paragraphs 5.6, 5.7 and 10 of the respondent’s opposing affidavit on pages 360 and 365 of the record of
proceedings.
4
Paragraph 75 of the opposing affidavit on p 376 of the record
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bearing products. The Finance Act 7 of 2021 had no retrospective application and so it could
not govern the period before January 2022, and for that reason, no royalties were payable. The
amount collected must therefore be refunded.
The second leg of counsel’s argument was that royalties were computed on gross fair
market value and not the invoice value or the selling price. According to counsel, from a
reading of the law, royalties were based on the gross market value. The answer to the question
on what royalties were, determined how one computed the charge. According to counsel, that
answer was provided by the respondent in its opposing affidavit. 5 The respondent
acknowledged that a royalty was a percentage of the gross amount realised from the sale of a
mineral.
According to counsel, while the State owned minerals, it did not own transport costs,
or insurance costs. Royalties could only be limited to a share of the finite resource. The gross
fair market value therefore referred to the market value of the minerals and not the costs
attendant on the distribution of the mineral. It was about the share of the mineral produced as
opposed to the mineral distributed. Any other consideration would entail that the sovereign
would lay a claim on other resources that should otherwise be covered by a tax. There was no
formula for determining the face value of an invoice. The face value excluded any thing else
that was not a mineral.
According to Mr Mpofu, a product could be sold under different conditions. It could be
sold Cost Insurance Freight (CIF), Free on Board (FOB) or just Cost Freight (CF). A seller
could sell two metric tonnes of chrome ore concentrates to two different people in China. To
one client it could be CIF while the other was COB. There would be two different invoices,
which would further entail that the rates applicable to the two were different. Counsel’s point
was that the rates ought to be the same because the transaction involved the same mineral. The
destination did not matter at all, and the royalty payable could not be differentiated on the basis
of the destination.
In his response, Mr Bhebhe for the respondent submitted that the intention behind the
levying of loyalties was to compensate the State for the depletion of non-renewable resources6.
That intention must never be lost. Resources should never be depleted for free. That purpose

5 Para 42 of the respondent’s opposing affidavit p 369 where the respondent said:
“The applicant fails to appreciate that a royalty is the country’s way of getting a share from the loss of its finite
resource. Every jurisdiction has its own way of getting that share and Zimbabwe just decided to get a percentage of
the gross fair market value, meaning a percentage of the proceeds of the sale without any deduction being made.”
6
ZIMRA v Murowa Diamonds (Private) Limited SC 85/23
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was also captured in s 244 of the Act. Counsel submitted that the applicant’s argument that
chrome ore and ferrochrome were not minerals but minerals bearing products was because of
beneficiation. The term mineral bearing product was not defined. What was defined was the
term mineral. Beneficiation was not defined in the law. Even if the mineral was subject to
beneficiation, it remained a mineral. When one calculated the royalties in terms of s 37(9) of
the Finance Act, costs of beneficiation and other attendant costs were not to be included. A
mineral did not lose its character because of beneficiation. Chrome ore concentrate was a
mineral as defined in s 5 of the Act. If the applicant’s argument were accepted, it would result
in the absurdity that only refined minerals would attract royalties, and unprocessed or semi
processed minerals would not.
Mr Bhebhe further submitted that very few minerals were exported in raw form. They
were beneficiated in order to market and sell a product of higher value. Ferrochrome and
chrome ore were therefore products of beneficiation, and the mineral was subject to royalties.
The intention was not that only dirty minerals should pay royalties.
As regards the alternative argument, Mr Bhebhe submitted that the gross fair market
value was the methodology of calculation of royalties. Questions of fairness or equity did not
arise. Section 37(2) of the Finance Act was clear that royalties were based on the face value of
the invoice and not the face value of minerals. If in that invoice they were other costs included,
then that was the applicant’s problem. Section 37(9) referred to gross fair market value, and
therefore the deduction of costs incurred in the production of minerals was not permitted. The
word gross referred to the total amount before deductions. Transport costs should not be
included in the invoice if the applicant did not want them considered as part of the gross fair
market value. Otherwise, once they were included, they should not be deducted.
Mr Bhebhe further submitted that in the calculation of royalties, it did not matter where
minerals were sold. Transport costs were deducted for income tax purposes as allowable
deductions. The applicant could not deduct transport costs when these were allowable
deductions for income tax purposes.
In his reply, Mr Mpofu submitted that royalties were not charged on a philosophical
basis but were charged in terms of an enabling legislation. He further submitted that the
question whether chrome ore and ferrochrome were minerals or mineral bearing products was
critical. The disjunctive ‘or’ meant that there was a difference between minerals and mineral
bearing products, and that before the Finance Act 7 of 2021, there were no royalty rates for
mineral bearing products.
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Mr Mpofu insisted that ferrochrome was man made. There was a distinction between
gold and a ring. The question of beneficiation did not arise in the identification of minerals, but
in the rate. Section 37(9) excluded post production costs.
As far as the calculation of the royalties was concerned, counsel submitted that the State
had no royalties in transport. If royalties were calculated on transport, then they ceased to be
royalties. The calculation of royalties had to be limited to the resources being depleted. Section
37(9) of the Finance Act related to the face value of the mineral and was qualified by the
schedule to a percentage of the gross fair market value of the mineral. It would be absurd for
instance to include legal fees that may have been charged along the way, as part of the gross
fair market value. There was no law that permitted the respondent to collect these post
production costs.
Mr Mpofu further submitted that the treatment of postproduction costs as allowable
deductions for income tax purposes did not arise in the proper identification of a royalty.
Counsel further submitted that in accordance with s 15B of the Interpretation Act7, the
statements by the Minister of Finance were irrelevant to the interpretation of the relevant law
on payment of mining royalties. The Minister’s speech did not deal with the intention of the
law maker, but his opinion of the law, or the interpretation of the law.

THE ANALYSIS
Two issues arise for determination in this dispute. The first is whether the applicant was
obliged to pay royalties on ferrochrome and chrome ore concentrates that it disposed of during
the period January 2019 to September 2022. If the court determines that the applicant had an
obligation to pay the royalties, then the second issue to be determined is whether the respondent
properly calculated the royalties to be paid for the period in dispute. I proceed to deal with the
first issue hereunder.
Whether royalties were payable on ferrochrome and chrome ore concentrates disposed
during the period January 2019 to September 2022
The applicant contends that no royalties were fixed for mineral bearing products before
the Finance Act 7 of 2021, which introduced s 37B. The applicant claimed that it produced and
disposed chromite ore concentrates, and ferrochrome alloys, which were mineral bearing
products. It contends that chromite ore concentrates were ore that was mined, crashed and

7
[Chapter 1:01]
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simply washed to remove soil and required further downstream beneficiation before the
mineral was recovered. For that reason, the applicant further contended that chromite ore
concentrate was simply a natural mineral bearing product. The applicant also contended that
ferrochrome was a man-made mineral bearing product which was manufactured by blending
chromite ore and other raw materials such as coke/coal, reductants and fluxes), which go
through a smelter to produce an alloy.
The respondent on the other end averred that what the applicant produced and sold to
the Asian, American and European markets were minerals in which the liability to pay royalties
arose by virtue of s 244 of the Act. The respondent argued that the word ‘mineral’ as defined
in the Act or as defined by dictionaries never denoted a substance that had to be subjected to a
refinement process. All that was required was that the substance be formed by a geological
process. No human processing was contemplated in making a mineral that was contemplated
by s 244 of the Act and s 37 of the Finance Act.
Section 244 of the Act sets the foundation for the levying of royalties. That section
provides as follows:

“244 Royalty
(1) Subject to this Part, the miner of a registered mining location shall pay royalty on all
minerals or mineral-bearing products won from such location which have been disposed of by
him or on his behalf, whether within or outside Zimbabwe, during any month, at such rate per
unit of mass as may be fixed in terms of section two hundred and forty-five.” (Underlining for
emphasis)

The Act does not define the words ‘mineral bearing products’. In s 5, the Act however
defines the word mineral as follows:

“mineral” means—
(a) any substance occurring naturally in or on the earth, which has been formed by or subjected
to
a geological process; and
(b) any substance declared to be a mineral in terms of paragraph (a) of subsection (3), to the
extent
of such declaration;
but does not include—
(i) except for the purposes of Part XX, mineral oils and natural gases; or
(ii) any substance declared not to be a mineral in terms of paragraph (b) of subsection (3), to
the extent of such declaration.” (Underlining for emphasis)

Section 5(3)(b) which is referred to in the definition of mineral provides that the
Minister may by statutory instrument, declare that any naturally-occurring substance which is
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obtained or extracted by mining or quarrying or by similar methods, to be a mineral for

purposes of the Act. This provision does not concern us as herein as the Minister made no such
declaration in respect of the products that are in dispute.
The royalty rates are fixed in terms of s 245 of the Act as read together with the Finance
Act. Section 245(5) provides that in fixing the rate of royalty payable in terms of subsection
(1) the House of Assembly may fix different rates of royalty in respect of ‘different minerals
and mineral-bearing products’. It is therefore clear to me that there is a distinction between
minerals and mineral bearing products. It is also clear that the rates of royalties for the minerals
and mineral bearing products are not necessarily similar, as the law permits the legislature to
fix different rates in respect of the two.
From a reading of the law, it appears to me that before royalties can be charged on a
product, a clear distinction must therefore be made as to whether the product on which a royalty
is to be levied is a mineral or a mineral bearing product. Regrettably, while the law defined the
word ‘mineral’, it did not likewise define the words ‘mineral bearing products’, despite the
extensive usage of that term in the Act. It seems that the respondent itself was uncertain at
some point on what exactly the applicant was required to pay royalties on. For instance, in para
5.6 of the opposing affidavit, the respondent averred that the applicant ‘was selling minerals
mined in Zimbabwe’ and was therefore required to pay royalties8. In para 10, the respondent
averred that ‘ferrochrome is a product of the beneficiation of chrome ore to remove impurities
and extract chrome metal from the oxide. Ferrochrome is therefore a mineral bearing
product’.9 Be that as it may, in its heads of argument the respondent contends that the same
ferrochrome was a mineral on which royalties were payable.
As already stated, the Act does not define the term ‘mineral bearing products’. Both
parties did not assist the court by providing an informative definition of the term in their heads
of argument or oral submissions. I surfed the internet for online legal definitions of the term,
but I did not find a precise definition of ‘mineral bearing product’. All the online definitions
specifically referred to ‘mineral products’. The Law Insider10 defines mineral products as:

“All ores produced from the Premises which are sold, processed, or refined for their Mineral
content and all products derived from such processing or refining including, without limitation,
dore bullion, precipitates and concentrates of Minerals.”

The same source also defines mineral products in the following terms:
8
See p 359 of the record
9
Page 365 of the record
10
Mineral Products Definition: 209 Samples l Law Insider https://www.lawinsider.com
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“means things produced and prepared in a marketable state by simple treatment processes such
as washing or drying, but without undergoing any chemical change or process or manufacturing
by the lessee, concessionaire or owner of mineral lands.”

Yet another definition from the same source defines mineral products as:

“all ores, gravel, sand, metals, gems and minerals mined or extracted from the property or any
portion thereof and any concentrates produced therefrom.”

Be that as it may, the words mineral bearing products are used in several parts of the
Act, which helps to provide some context concerning its meaning. From the above definitions
of mineral product and taking cue from the context in which the term is used in the Act, one
can conceive of mineral bearing products as referring to materials or substances that contain
mineral elements in such quantities that are economically exploited. Examples of such products
would include ores and concentrates.
It is also important to critically evaluate the word ‘mineral’ as defined in the Act, and
as defined generally under the common law. The Law Dictionary defines the word ‘mineral’
as follows:

“Any valuable inert or. Lifeless substance formed or deposited in its present position through
natural agencies alone, and which is found either in or upon the soil of the earth or in the rocks
beneath the soil. Barringer A Adams, Mines, p. Ixxvi. Any natural constituent of the crust of
the earth, inorganic or fossil, homogenous in structure, having a definite chemical composition
and known crystalisation. The term includes all fossil bodies or matters dug out of mines or
quarries, whence anything may be dug, such as beds or stone which may be quarried. Earl of
Rose v Wainman, 14 Mees. & W. 872. In its common acceptation, the term may be said to
include those parts of the earth which are capable of being mined or extracted from beneath the
surface, and which have a commercial value. Williams v. South Penn Oil Co..52 W. Va. 181,
43 S. E. 214, 60 LL R.A. 795. But, in its widest sense, “minerals” may be described as
comprising all the substances which now form or which once formed part of the solid body of
the earth, both external and internal, and which are now destitute of or incapable of supporting
animal or vegetable life. In this sense, the word includes not only the various ores of the
precious metals, but also coal, clay, marble, stone of various sorts, slate, salt, sand, natural gas,
petroleum, and water.11”

It seems to me that the above online definition of mineral is in sync with the definition
of mineral provided in s 5 of the Act. It helps unpack the definition of mineral as the one in the
Act is narrow and restrictive. The underlying theme is that a mineral is a substance formed or
deposited through natural means and is found in or upon the soil of the earth or in the rocks
underneath the soil. The substance may have been formed by or subjected to a geological

11
TheLaw.com https://dictionary. thelaw.com
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process. The Act does not define the term geological process. In a wider sense, a geological
process means the dynamic actions or events that occur at the earth’s surface due to the
application of natural forces caused by gravity, temperature changes, freezing and thawing,
chemical reactions, seismic shaking, and the agencies of wind and moving water, ice and
snow.12 The geological process does not involve any human intervention in its various forms.
It is therefore a process that does not admit of any human interference. Once there is some
human interference, then it ceases to be a geological process.
In my view, what therefore differentiates minerals from mineral bearing products is that
in the case of the former, the occurrence is a natural process that arises without human
intervention, while in the case of the later, there is some simple treatment processes that are
undertaken to prepare the product into a marketable state.
The applicant’s case is that it mines chromite ore which undergoes further processing
of smelting at its smelter to produce ferrochrome alloy. Some of the chromite ore that does not
go through the smelting process, goes through a washing plant and is exported in raw form as
chrome ore concentrates. It is the ferrochrome and chrome ore concentrate that find their way
to the export market. The applicant’s case as I understood it is that because these products
were not minerals, they were not liable to pay mining royalties for the period under
consideration. The royalty rates as set by the Minister applied specifically to minerals, and not
mineral bearing products.
The question that arises is whether ferrochrome and chrome ore concentrates are
minerals or mineral bearing products. From the analysis of the definitions of mineral and
mineral products above it seems to me there is clearly a distinction between the two. It is for
that reason that in s 244, the Act makes a deliberate reference to minerals or mineral bearing
products. In its founding affidavit, the applicant averred that ferrochrome alloy is not won from
the earth nor is it formed by a geological process. It is thus man made. The applicant goes on
to illustrate the procedure through a diagrammatic presentation of the process at its Kwekwe
Smelter.13
In its response, the respondent denies that ferrochrome alloy is man made. It contends
that ferrochrome is a product of beneficiation of chrome ore to remove impurities and extract
chrome mental from the oxide. It then goes on to declare that that ferrochrome is therefore a

12
Geological process – Eionet https: //www. Ionet. Europa.eu>com : https://studysmarter.co.uk
13
Annexure 1 at p 58 of the record
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mineral bearing product.14 In my view, the very process that the respondent refers to as
beneficiation takes the product outside the ambit of a mineral as defined in s 5 of the Act. That
process cannot be referred to as a geological process that would have occurred naturally.
It was not disputed that the applicant is in the business of mining chrome ore. It was
also not disputed that the chrome ore undergoes further processes that yield chrome ore
concentrates and ferrochrome for the export market. The final products which are sold and in
respect of which mining royalties must be levied do not fit in the definition of minerals as
defined above or in the Act. It would be stretching the letter and spirit of the law too far to
imagine that the process of generating chrome ore concentrates and ferrochrome from chrome
ore can be deemed to have been formed by or subjected to a geological process as contemplated
in the definition of a mineral. I am therefore satisfied that chrome ore concentrates and
ferrochrome are mineral bearing products as contemplated in the Act.
In its heads of argument, the respondent argued that the applicant did not deny that what
it sold to the Asian, American and European markets was a ‘substance occurring naturally in
or on earth, which has been formed by or subjected to a geological process’ that it had extracted
from the earth’s bossom. The respondent further averred that if a literal interpretation of s 37
of the Finance Act as read with ss 244 and 245 of the Act would distinguish a mineral and a
mineral bearing product and impose a royalty only on the disposal of a mineral then such an
interpretation would yield absurd results. It would mean that the miner who beneficiated and
refined its mineral before disposing it would not be liable to pay royalties to the State, whilst
the miner who mined the mineral and did not refine or beneficiate it would be liable to pay
mining royalties.
The respondent further averred that it could not have been the intention of the
legislature in enacting s 37 of the Finance Act to create such an absurdity. Such an
interpretation would defeat the whole purpose of levying royalties on miners. The respondent
further urged the court to adopt a purposive interpretation of the law to arrive at the intention
of the law maker.
The respondent cited in its heads of argument, the following pertinent dictum from the
case of Zimbabwe Revenue Authority v Unki Mines (Pvt) Ltd15, in which the court held as
follows:

14
Para 10 of the opposing affidavit on p 365 of the record
15
SC 130/22
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“In this jurisdiction, both the golden rule and the purposive rule of interpretation are some of
the many principles that are applied to, and assist the courts in the construction of
statutes……The choice of the applicable principle is often dictated by the overall facts and
circumstances of each case. Where the context to be construed is clear and unambiguous and
its construction does not lead to an absurdity, the court seized with the matter would simply
apply the golden rule of interpretation. Where however, an absurdity arises, the court is obliged
to apply the contextual or purposive approach. There is no one-size fit all approach between
these two principles in the interpretation of fiscal or tax legislation.

In VFSL (Pvt) Ltd & Ors v ZIMRA HH 23/19 at pp29-32, the Fiscal Appeal Court collected a
retinue of cases that have made pronouncements on the use of each principle. The picture that
emerges from a consideration of those cases is that it is proper for a court construing fiscal
legislation to go beyond literalism and embrace the contextual approach in a bid to find the true
intention of the legislature. …..”

The interpretation of taxing statutes was also dealt with by LORD CAIRNS in Partington
v The Attorney-General 21 LT 370 at 375, where he said:

“If the person sought to be taxed comes within the letter of the law, he must be taxed, however
great the hardship may appear to the judicial mind to be. On the other hand, if the Crown,
seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is
free, however apparently within the law the case might otherwise appear to be. In other words,
if there be an equitable construction, certainly such a construction is not admissible in a taxing
statute where you can simply adhere to the words of the statute.”

Another useful and instructive authority which was also cited in the ZIMRA v Unki Mines
judgment is the case of Innscor Africa Limited & Anor v Competition & Tariff Commission SC
52/18, where the court on page 11 of the judgment held as follows:

“Interpreting words in their context requires the courts to pay due regard not only to the
meaning assigned to the grammatical use of language but also the context, which requires
consideration of the rest of the statute as well as its subject matter and its content. This position
was affirmed in the case of Stellenbosch Farmers’ Winery Ltd v Distillers Corp (SA) Ltd 1962
(1) SA 458 (AD) 476, as quoted by G M Cockram, p 41 of The Interpretation of Statutes 3rd ed,
as follows:

It is the duty of the court to read the section of the Act which requires interpretation
sensibly, i.e. with due regard, on the hand, to the meaning which permitted grammatical
usage assigns to the words used in the section in question, and, on the other hand, to
the contextual scene, which involves consideration of the language of the rest of the
statute as well as the matter of the statute, its apparent scope and purpose, and, within
limits, its background.”16

In Zambezi Gas (Private) Limited v N.R. Barber (Private) Limited17, the court had this
to say:

16
At p 11 of the judgment
17
SC 3/20 at p7-8
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“It is the duty of a court to interpret statutes. Where the language used in a statute is clear and
unambiguous, the words ought to be given the ordinary grammatical meaning. However, where
the language used is ambiguous and lacks clarity, the court will need to interpret it and give it
meaning.”

The various canons of interpretation of statutes provide valuable guidance to the court
in its endeavour to decipher the intention of the legislature. The peculiarities of each case will
determine which approach to follow in unravelling the true intention of the law maker. From a
reading of ss 244 and 245 of the Act, it is clear to me that the legislature intended that a
registered miner must pay royalties on minerals or mineral bearing products.
Before its amendment by Finance Act 7 of 2021, the Schedule to Chapter VII of the
Finance Act, provided for rates of mining royalties in s 37A as follows:

“37A Collection of mining royalties

(1) With effect from the 1st January, 2010, and every subsequent year of assessment, the
following persons shall, as agents for and on behalf of Commissioner-General of the Zimbabwe
Revenue Authority, deduct royalty on the following minerals at source, based on the face value
of the invoice therefor—
(a) in respect of precious stones, precious metals (other than gold), base metals, industrial
metals, coalbed methane and coal, the Minerals Marketing Corporation established in terms of
the Minerals Marketing Corporation Act [Chapter 21:04], or any person authorised by the
Minerals Marketing Corporation to export such minerals in its own right;…”

The Finance Act, 7 of 2021 introduced a new section 37B after s 37A. The new section
37B provides as follows:

“37B Methodology for determination of rates of royalty

Rates of royalty for specific minerals or mineral bearing ore shall be calculated by using the
following criteria—
(a) in the case of platinum group metals—
(i) concentrate - 85% of the international price of the refined mineral contained therein by
reference to the price on the London Metal Exchange on the date of the transaction on which
royalties will be paid; and
(ii) matte - 90% of the international price of the refined mineral contained therein by reference
to the price on the London Metal Exchange on the date of the transaction on which royalties
will be paid;
(b) in the case of gold, invoice value as determined from time to time by Fidelity Printers and
Re- fineries;
(c) in the case of diamonds and all other minerals, the invoice value as determined by the
Minerals Marketing Corporation of Zimbabwe.”

It is clear to me from a reading of the above provisions that the old Finance Act in s
37A, made no reference to the rates of royalty for mineral bearing products. It was only after
the promulgation of the Finance Act 7 of 2021, which introduced s 37B, that there is now
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specific reference to the methodology for determination of rates of royalty for specific minerals
or mineral bearing ore. I therefore agree with the applicant’s submission that the introduction
of s 37B, through the Finance Act 7 of 2021 buttresses the applicant’s contention that no
royalties were fixed for mineral-bearing products before 1 January 2022.
The respondent’s submission was that a literal interpretation of s 37 of the Finance Act
as read with ss 244 and 245 of the Act would distinguish a mineral and a mineral bearing
product and impose a royalty only on the disposal of a mineral. The respondent also averred
that the law would benefit a miner who beneficiated and refined its mineral before disposing
it, as there would be no liability to pay royalties as compared to the miner who mined a mineral
and chose not to refine it.
The respondent’s submission in this regard is not correct reflection of the law in my
view. I have already stated that from my reading of the applicant’s case, it is not saying that
royalties should never be charged on mineral bearing products. Its argument is simply that no
royalty rates were fixed for mineral bearing products prior to 1 January 2022, and it was
therefore not liable to pay mining royalties if no rates were fixed for that purpose. The intention
of the legislature is clear from the wording of ss 244 and 245 of the Act, as read together with
s 37A of the Finance Act before its amendment. There is no need to call into aid the purposive
interpretation as was urged upon the court by the respondent. There is no ambiguity in the
legislation which calls for a departure from giving the words used in the law their ordinary
grammatical meaning in order to find the intention of the legislature.
Section 244(1) of the Act provides the legal framework for the charging of mining
royalties on minerals or mineral bearing products. The legislature was also alive to the need to
make the distinction between minerals or mineral bearing products. It was also clear that the
legislature intended that mining royalties be paid on both minerals or mineral bearing products.
What it failed to do was to create the concomitant obligation for the payment of such mining
royalties in respect of mineral bearing products by fixing the rate of royalties for such mineral
bearing products. In other words, the liability to pay mining royalties on minerals or mineral
bearing products did not just end with the provision of a legal framework through s 244 of the
Act. Section 245 of the Act obliged the legislature to go a step further and fix the rate of royalty
for the said minerals or mineral bearing products. The rates of royalties are fixed in the Finance
Act. I have already noted that before the Finance Act, 7 of 2021 was promulgated, the
legislature had only fixed the rates of royalties for minerals and not mineral bearing products.
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In para 43 of its heads of argument, the respondent argued that prior to the promulgation
of the Finance Act 7 of 2021,

“….there was no provision in the Finance Act providing for a lower rates of royalties for ores
and concentrates. All royalties were charged based on the assumption that it is the mineral in
the ore that is being levied royalties on. The mineral’s state of impurity was not a consideration
then.” (Underlining for emphasis)

The respondent’s interpretation of the law is, in the court’s view erroneous. The legal
framework for the charging of royalties on both minerals and mineral bearing products has
always been in existence. There was no need for the respondent to assume that it was the
mineral in the ore that royalties were levied on. The law required the respondent to bifurcate
minerals and mineral bearing products and fix rates of royalty for both separately. There was
no need to make assumptions when the law had provided the framework. The legislature was
simply required to fix rates of royalty for mineral bearing products because the law already
allowed it to do so. The respondent is not required to collect revenue based on assumptions. It
must do so in terms of an enabling legal instrument. The legal basis for the collection of
royalties on chrome ore concentrates and ferrochrome disposed by the applicant during the
period 1 January 2019 to 30 September 2022, did not exist until rates of royalties were fixed in
the Finance Act for that purpose.
In its heads of argument, and the submission by its counsel, the respondent did not
address the issue of mineral bearing products and whether rates of royalties were fixed in
respect of such mineral bearing products prior to 1 January 2022. It did not bother to explain
the difference between minerals and mineral bearing products, even in the face of such an
impassioned criticism by the applicant, of the correctness of the respondent’s decision to claim
royalties on mineral bearing products. In fact, the respondent’s position, as stated in para 43 of
its heads of argument, was that it charged royalties on the assumption that it was the mineral
in the ore that was being levied royalties on. The law must not be applied on the basis of
assumptions, where the intention of the legislature is clear. The law must be interpreted in a
manner that accords with that legislative intent. Assumptions have no place in that
interpretative process where the intention of the legislature can be easily gleaned from the letter
of the law.
In view of the above observations, the court determines that chrome ore concentrates
and ferrochrome alloy are not minerals but mineral bearing products. The applicant did not sell
the chromite ore that it extracted from the earth. Prior to January 2022, the Minister had not
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fixed rates of royalties in respect of mineral bearing products, and for that reason the applicant
was not obliged to pay royalties for the chrome ore concentrates and ferrochrome alloy which
it disposed during the period 1 January 2019 to 30 September 2022.
While the law fixed the rates of royalty for minerals, it did do the same for mineral
bearing products. The respondent cannot, based on mere assumptions, extend the rates of
mining royalties to mineral bearing products when the legislature was cognisant of the
distinction between minerals and mineral bearing products, but failed to fix rates of royalties
for mineral bearing products. Further, from a consideration of the definitions of mineral and
mineral bearing products, this court is satisfied that what the applicant produced for sale to the
export market were mineral bearing products which called for the fixing of separate rates of
mining royalties, as distinct from those applicable to minerals. The applicant is therefore
entitled to the relief that it seeks in the main.
Having made that finding, it is unnecessary to traverse the second leg of the applicant’s
case, which is whether the royalties which it was required to pay were properly calculated.

COSTS
Costs follow the event. I find no reason to depart from this general rule and award costs
of suit to the applicant as the successful party.

DISPOSITION
Resultantly it is ordered that:
1. The application be and is hereby granted with costs.
2. It is declared that chrome ore concentrates, and ferrochrome are mineral bearing
products and no mining royalties are payable on their disposal.
2.1 Consequent to paragraph 2, the applicant is not liable to pay mining royalties to
the respondent on the chrome ore concentrates and ferrochrome which the
applicant disposed during the period 1 January 2019 to 30 September 2022.
3. The schedules issued by the respondent to the applicant on 24 March 2023 for the
total sums of ZWL881 544 511.00 and USD 10 523 347.00, as shortfalls of mining
royalties be and are hereby set aside.
4. The respondent is ordered to refund the sums of ZW 389 606 502.95 and USD 2
485 183.83 and any other amount paid by the applicant to the respondent in
discharging the mining royalties in the total sums of ZWL 881 544 511.00 and USD
10 523 347.00, as the shortfall of mining royalties and penalties due by the applicant
for the period January 2019 to September 2022.
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MUSITHU J: ……………………………………….

Maguchu & Muchada, legal practitioners for the applicant

Kantor & Immerman, legal practitioners for the respondent