Zimbabwe grab deadline hits platinum shares

THE JSE’s platinum mining index tumbled more than 3% yesterday as Zimbabwe gave foreign mining firms six months to sell a majority stake to local black investors.

Impala Platinum, the world’s second-largest platinum producer, pulled back 6% at one point yesterday before closing 3% down at R192. Aquarius Platinum fell 9% to R37,50 and Anglo Platinum retreated 2,4% to R663.

According to the Zimbabwean Government Gazette, the calculation of the value of assets would be agreed on between the minister of youth development, indigenisation and empowerment and the companies, causing uncertainty about whether they would be realistically valued.

This is a further tightening of screws on one of the few profitable sectors in Zimbabwe and is certain to curtail capital inflows. Zimbabwe has the world’s second-biggest platinum reserves after SA.

Black ownership of companies was first legislated as the Indigenisation and Economic Empowerment Act in 2007. Last Friday’s gazetting laid out the requirements for the implementation of the act, stipulating timelines for the first time and catching the market on the back foot.

"It says you have 45 days to submit plans and then six months to enact them. That’s quite a line in the sand," said Asa Bridle of investment bank Seymour Pierce in London.

There had been an understanding that the indigenisation policy would be phased in over a few years. In SA, by contrast, mining companies were given 10 years to reach 26% black ownership, with the awarding of mining and prospecting rights depending on empowerment levels, social plans and staff demographics.

The Zimbabwe Chamber of Mines has said its members were willing to sell a 26% stake.

President Robert Mugabe was quoted by AFP as saying on Sunday: "We are taking over. Listen, Britain and America: this is our country. If you have companies which would want to work in our mining sector, they are welcome to come and join us, but we must have our people as the major shareholders."

The minimum threshold for indigenisation of every foreign-held mining business in Zimbabwe is a net asset value of just $1. The threshold had been expected to be $500000.

"What is the valuation methodology to be used and how fair it will be is the great question. I get the feeling that Aquarius don’t have much clarity and they’re not alone in that," Mr Bridle said.

Impala, which has about half its unmined resources in Zimbabwe and holds 87% of Toronto-listed Zimplats, has been active in its approach to indigenisation. In 2006, it gave the government a third of its resources in exchange for empowerment credits.

Mining lawyer Peter Leon, of Webber Wentzel, said unless mining companies had specific contracts allowing for international arbitration of what amounted to expropriation of assets, or were protected by a bilateral investment treaty, they would have few remedies. "Investors, particularly in the mining sector, are very wary of suing foreign governments because it really does affect relationships," Mr Leon said.

Aquarius, which planned to mine 100000oz of platinum group metals in Zimbabwe this year, is in talks with the government. "Further information will be made available as and when discussions have been finalised."

Anglo Platinum is developing a 65000oz-a-year, $450m project in Zimbabwe, known as Unki.

Source: www.businessday.co.za

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