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Zimbabwe to lower royalties in Implats deal

Memory Mataranyika | Mon, 14 Jan 2013 09:19
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[miningmx.com] – NEW indigenous shareholders in Zimplats will pay the company $153m in settlement of a release of ground deal signed with Zimbabwe in 2006 while the terms of the deal require the government to lower mineral royalties and ground rental fees in return for the miner's compliance.

This comes as part of an arrangement which saw Zimplats give up platinum mining claims that were not in the company’s future expansion programs. The claims were given to the government in return for empowerment credits which Zimplats will now be paid by the new indigenous shareholders.

“The government’s obligations under the release of ground agreement have been passed on to the groups that got indigenisation shares. All in all, they have to pay Zimplats close to $153m,” an official said.

In an overview of the deal, financial advisory firm, Brainworks Capital, said: “Assuming a 100% dividend payout on free cash-flows over the next 10 years, this will result in indigenous entities receiving an estimated $164m in cash-flow.”

“Zimplats has sustainably generated average net profit per annum in excess of $100m per year since 2010,” a performance that “is expected to be sustained” going forward, the advisory said.

Under the deal signed on January 11, Implats agreed to cede 51% control in Zimplats under a deal CEO Terence Goodlace said would restore certainty to the Zimbabwe operations.

The National Indigenisation and Economic Empowerment Board (NIEEB) will get 31% while 20% will be shared equally by employees of the company and the community around which Zimplats operates.

Proposals contained in Implats’ indigenisation implementation plan require that Zimbabwe reverse the mineral royalty and ground rental fees it hiked last year and to honour the release of ground agreement.

In return, the company agreed to vendor-finance the acquisition of shares in Zimplats by black Zimbabwean groups.

“It was further agreed that by June 30, 2013 the government would use its best endeavours in the utmost good faith to, amongst other things, amend the 2012 Mining Regulations in such a manner so as to reduce all ground rental payable by Zimplats to the same levels as were in force immediately prior to the promulgation and coming into force of the 2012 regulations,” Implats said in its statement on the deal.

It was not immediately clear what could happen to the deal signed last week should the Zimbabwe government fail to carry out its obligations.

The empowerment agreement also requires the indigenous shareholders to carry out their shareholder obligations by providing funding where necessary or risk dilution of their shareholding should Implats fulfil this obligation.

Meanwhile, Business Day quoted Goodlace saying on Monday that the Zimplats operation has “vast potential … with fantastic geology and a great operating environment".

The Sydney listed Zimplats is forging ahead with its $460m expansion of its operations to boost platinum output to about 270,000 ounces per year.


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