David Brown, CEO, Impala Platinum
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Impala prepared for Zimbabwe company grab
Allan Seccombe
Posted: Wed, 12 Mar 2008

[miningmx.com] -- IMPALA Platinum put in place measures two years ago to deal with the majority black ownership laws now coming into effect in Zimbabwe, the world’s second-largest platinum producer reiterated on Wednesday.

President Robert Mugabe last week signed into law the Indigenisation and Economic Empowerment Bill that was passed by parliament in November last year. The news further deepened the gloom of foreign investors in the country where inflation has spiralled out of control, topping 100,000%.

The new law obliges foreign owned companies to sell 51% of their Zimbabwean business to black Zimbabweans. In neighbouring South Africa, 26% of mining companies's shares must be owned by black South Africans.
Implats had planned for this event
Among the companies whose shares fell on the news was Impala Platinum, one of the most exposed of any South African company to Zimbabwe. It owns 87% of Zimplats. Impala's shares fell five percent on the news combined with a decline in the platinum price on Monday.

“As previously communicated Implats had planned for this eventuality and has agreements in place which will be taken into account when looking at the overall compliance to the new law,” Impala said in a statement.

The bulk of Impala’s resources are in Zimbabwe, where Zimplats is undertaking a US$340m expansion to increase production to 160,000 oz of platinum a year from 2010. Production in 2007 was 96,500 oz.

Impala is also a joint owner with Aquarius Platinum in Mimosa, which produced 78,200 platinum oz in concentrate last year.

In May 2006, Zimplats agreed with the Zimbabwean government to divest itself from 36% of its resources in exchange for empowerment credits of 19.5% and cash of $51m or 29.25% of credits in lieu of the money.

“Credits will also be received for infrastructure and social spend the quantum of which still has to be finalised,” Impala said.

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“Implats wishes to advise that the proposed Mines and Minerals Act Amendment Bill that underpins this legislation has still to be introduced to parliament,” it said.

Impala CEO David Brown has acknowledged that the Zimbabwean assets are not fully factored into the company’s share price and won’t be until there’s a resolution to the situation in the country.

Of Impala’s 218 million reserve and resource ounces, nearly half of those are in Zimbabwe, home to the second-largest known platinum deposit in the world.

Mugabe has ruled the country since independence from Britain in 1980. His period in office has been marked by an economic implosion because of policies adopted by his government, including the seizure of white-owned farms, which destroyed the country’s agricultural base.

At a media conference on Tuesday, Paul Mangwana, the minister for indigenisation and empowerment, said the government would prescribe which businesses needed to have 51% local ownership, deciding this on the level of capital investment and employment levels.

Decisions on empowerment credits for foreign firms, particularly those in the mining sector, would be based on their level of social investment.

“We will not force partners on companies. Only when an investor fails to identify a suitable partner will government step in because we will have a databank of potential investors," Mangwana is quoted as saying by Reuters.

The question has been raised now these stakes will be paid for by indigenous Zimbabwean companies in a country where foreign exchange is in chronic short supply. Cynics suggest Mugabe's signing into law of these regulations is a move to ensure continued support from his cronies ahead of elections this month by perhaps easing them into foreign companies.

Mangwana’s announcement, seen by some as a move to calm investors’ nerves, was quickly dismissed by the mining sector.

"A different explanation, outside the law, cannot allay fears. The most important thing is the form and content of the Act. A separate explanation by word of mouth cannot bring any comfort," Jack Murehwa, head of Zimbabwe's mining chamber, told Reuters.