/ 14 September 2011

Zimbabwe softens tone with foreign miners

Zimbabwe ministers said the country would not suspend any mining permits and that exceptions may be made to laws requiring foreign miners to give majority stakes to locals, bringing relief but no clarity to a policy that has alarmed investors.

The remarks by the mines minister and the empowerment minister at a mining conference come after most foreign operators appear to have bowed to government pressure on the issue, though details of deals struck remain clouded.

The recent empowerment law, signed in 2008, requires foreign miners to transfer 51% equity stakes in local entities to black investors. In August several companies received letters directing them to submit new plans within 14 days or risk losing their licences.

Mines Minister Obert Mpofu told the conference in Harare that the government did not intend to cancel any permits.

“We have no intention of cancelling any licences. There are some negotiations taking place with some parties. No licence has been cancelled. We have no such intention,” he said.

While investors in the country with world’s second-largest platinum reserves may welcome the comments, the abrupt change in tone will keep them guessing and reinforces the impression that the policy has been ad-hoc and based on brinkmanship.

‘Tremendous progress’
Companies that have felt the heat have included Zimplats, which the world’s second-largest platinum producer Impala Platinum owns 87% of, and Canada’s Caledonia Mining Corporation.

Both have so far survived threats to have their mining licences revoked for failure to comply with the new ownership law.

The charm offensive was maintained by Empowerment Minister Saviour Kasukuwere, who has been the face of the mine ownership drive by President Robert Mugabe’s Zanu-PF Party.

“With the mining industry, we’ve had our running battles, but now we’ve made tremendous progress,” he said.

“When there are exceptional circumstances, we’ll look at those circumstances in a manner that allows our country to move forward. We are aware of the capital requirements in mining; we are alive to those realities,” he told the conference.

‘Capital requirements’
Analysts have maintained that those “capital requirements” could force the government’s hand. Impoverished Zimbabwe simply has no money, private or public, to buy majority stakes in mining operations, nor the cash to keep them running.

Companies have said they will not get a viable return on their investments in Zimbabwe if they do not have majority stakes. The chief executive of Implats said in August that “51% equity just does not work”.

Analysts also see the law as a way for Mugabe’s Zanu-PF party to get badly needed funds ahead of elections scheduled for next year.

The stakes are extremely high. Zimplats, for example, accounts for about 10% of Implats’s roughly 1.8-million ounces of platinum production per year. — Reuters