Foreign-owned mining companies in Zimbabwe have one month to come up with plans which they are going to implement to cede majority ownership to locals. They have until May 10 to do so.
Mining companies worth $1 or more were given 45 days to submit plans on how they intend to comply with the new indigenisation laws on 25 March. But according to Veritas which analysed the new regulations there was no specific penalty for those that fail to do so.
The companies were also given 6 months, that is until 24 September, to actually cede their majority shareholding. The Minister of Mines could, however, extend this by another three months to Christmas.
The companies can sell their shares to the National Indigenisation and Empowerment Fund, the Zimbabwe Mining Development Corporation, the proposed Sovereign Wealth Fund, employees, management or communities.
Veritas says there are a number of issues that will have to be looked into because the regulations appear to be in conflict with the country’s constitution. The regulations could be in conflict with section 16 of the Constitution which deals with compulsory acquisition of properties or section 21 which deals with freedom of association.
The proposed laws have sent jitters in the mining sector especially in the platinum sector where the world’s largest producers have invested in Zimbabwe. Anglo Platinum the largest producer has just opened its Unki Mine near Shurugwi while Impala Platinum, the second, has a stake in Mimosa Mine near Zvishavane and owns Zimplats near Chegutu.
Share prices fell on the release of the new regulations. While this was viewed as bad news some analysts argued that this was a clear indication that Zimbabwe was a key player and could not be ignored. Zimbabwe has the second largest platinum reserves in the world after South Africa. It now has one of the world’s largest diamond reserves.
Bart Melek, head of commodity strategy for Canadian company TD Securities, said platinum could move into deficit by 2013, with palladium deficits to deepen over the next three years.
“The PGMs sector is a prime example where higher government taxes and ownership policies can materially impact future platinum and palladium prices,” he said warning that indifference toward “Zimbabwe’s rising resource nationalism…could very well be a mistake.”