DUBLIN--(BUSINESS WIRE)--Research and Markets (http://www.researchandmarkets.com/research/e56cf7/zimbabwe_mining_re) has announced the addition of Business Monitor International's "Zimbabwe Mining Report Q4 2011" report to their extensive offering of minerals market research publications.
Zimbabwe is richly endowed with deposits of chrome, gold, nickel and platinum, among other minerals. Its gold reserves are among the largest in Africa, while it hosts the second largest platinum reserves in the world. Another segment that has caught the attention of miners in Zimbabwe is diamonds, following the discovery of a number of significant kimberlites.
Indigenisation Debate Becomes More Heated:
BMI believes that the Zimbabwean government may stand to lose significant amounts of investments from Zimbabwe Platinum (Zimplats)'s parent company Impala Platinum (Implats) should it continue to push through with its revised Indigenisation and Economic Empowerment Act. With the government unlikely to back down from this initiative, negotiations are expected to continue and become increasingly confrontational.
In this context, in September 2011 Zimplats announced that it had received a letter from Zimbabwe's Minister of Youth Development, Indigenisation and Empowerment, Saviour Kaskuwere, informing the company that its indigenisation plans were not sufficient to meet the minimum requirements of the law and that the Minister of Mines and Mining had been asked to cancel Zimplat's operating licence.
Although Zimplats was quick to stress that its operating licence had not yet been cancelled, and that negotiations were ongoing, the incident highlights the increasingly politicised nature of the indigenisation debate and underlines the high risk attached to investment in Zimbabwe's mining sector at present.
It has not just been Zimplats either. Caledonia Mining also received a letter from Kaskuwere informing it that its operating licence for the key Blanket gold mine has also been suspended, pending the submission of a compliant indigenisation plan.
As we enter the final quarter of 2011, BMI believes that issues regarding the majority local ownership of mining assets remain the key challenge facing foreign mining companies operating in Zimbabwe. In March 2011 the government committed to the continuation of its controversial Indigenization and Empowerment Act, which calls for a 51% stake in all mining companies (with assets over US$500,000) to be divested to indigenous Zimbabwean groups, with this new ownership structure to have been agreed upon by September 2011.
Reaction from foreign miners operating in Zimbabwe has been negative, with Canadian miner Caledonia Mining stating that it will limit its spending in the country until there is further clarification about how indigenisation will be introduced. African Consolidated Resources has said that it does not intend to comply with the indigenisation law, as its operations remain in the exploration phase and therefore do not yet have a net asset value in excess of one dollar.
On a longer-term view if Western companies do decide to end their Zimbabwean operations as a result of indigenisation, then China is eager to enter the country. Such an arrangement could well be preferable for Robert Mugabe, who might prefer to deal with Chinese investors willing to take a minority stake in Zimbabwean mining operations, and who would bring significant amounts of funding to the sector. Moreover, China has not imposed sanctions or withheld budgetary aid to Harare in recent years, unlike Western powers. This would again appear to give Beijing the edge over Western interests.
Industry Forecast:
Forecasting growth rates for the Zimbabwean mining sector is a highly uncertain process at present, with so much of the sector's direction governed by political events. At base, BMI believes the scene is set for a period of strong growth, as the industry recovers following a disastrous period during the mid- 2000s. Certainly, the gold sector looks well placed, following the liberalisation of the sector in 2009, with BMI forecasting a more than doubling in gold output between 2010 and 2015.
Companies Mentioned:
- African Consolidated Resources
- Caledonia Mining Corporation
- Zimbabwe Platinum Mines (Zimplats)
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