President Robert Mugabe put Zimplats under pressure seven years ago to release some undeveloped platinum claims so that he could conclude a deal with Russia to supply Air Zimbabwe with Ilyushin planes in return for Russian company Norilsk acquiring the platinum claims.
Zimplats chief executive officer Greg Sebborn said the planes were 50 years-old.
The claims were worth US$150 million according to Zimplats’ acquisition price.
Zimplats would get US$50 million either in cash or in equity plus an empowerment credit of US$100 million.
Full cable:
Viewing cable 06HARARE563, ZIMPLATS NEARS DEAL TO RELEASE PLATINUM CLAIMS TO
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Reference ID |
Created |
Classification |
Origin |
VZCZCXRO2546
PP RUEHMR
DE RUEHSB #0563/01 1321247
ZNY CCCCC ZZH
P 121247Z MAY 06
FM AMEMBASSY HARARE
TO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 0010
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHUJA/AMEMBASSY ABUJA 1207
RUEHAR/AMEMBASSY ACCRA 1043
RUEHDS/AMEMBASSY ADDIS ABABA 1210
RUEHBJ/AMEMBASSY BEIJING 0067
RUEHBY/AMEMBASSY CANBERRA 0471
RUEHDK/AMEMBASSY DAKAR 0837
RUEHKM/AMEMBASSY KAMPALA 1264
RUEHMO/AMEMBASSY MOSCOW 0023
RUEHNR/AMEMBASSY NAIROBI 3627
RUEHFR/AMEMBASSY PARIS 1036
RUEHRO/AMEMBASSY ROME 1670
RUEHBS/USEU BRUSSELS
RUEHGV/USMISSION GENEVA 0565
RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 1422
RUEKJCS/JOINT STAFF WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEKDIA/DIA WASHDC//DHO-7//
RUCPDOC/DEPT OF COMMERCE WASHDC
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK//DOOC/ECMO/CC/DAO/DOB/DOI//
RUEPGBA/CDR USEUCOM INTEL VAIHINGEN GE//ECJ23-CH/ECJ5M//
C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000563
SIPDIS
SIPDIS
AF/S FOR B. NEULING
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE
STATE PASS TO USAID FOR M. COPSON AND E.LOKEN
TREASURY FOR J. RALYEA AND B. CUSHMAN
COMMERCE FOR BECKY ERKUL
E.O. 12958: DECL: 05/12/2016
SUBJECT: ZIMPLATS NEARS DEAL TO RELEASE PLATINUM CLAIMS TO
RUSSIAN COMPANY
REF: A. REF A: MOSCOW 4374
¶B. REF B: HARARE 340
¶C. REF C: HARARE 300
Classified By: Charge d’Affaires, a.i., Eric T. Schultz under Section 1
.4 b/d
——-
Summary
——-
¶1. (C) Zimplats CEO Greg Sebborn told econoff on May 2 that
the company had agreed in principle to release undeveloped
platinum claims to the GOZ. In a 4-way deal that could be
close to conclusion, the claims would go to the Russian
mining firm Norilsk, the GOR would provide Air Zimbabwe with
Ilyushin airplanes, and Zimplats would get cash, or equity in
the claims, plus a credit toward black economic empowerment.
However, Sebborn noted that obstacles remained, including
Zimplats insistence on President Mugabe’s signature on the
deal as well as the Russians conditioning the deal on
conclusion of a Bilateral Investment Promotion and Protection
Agreement (BIPPA) with Zimbabwe. Sebborn also noted that
China, piqued at Zimbabwe’s failure to pay down bilateral
arrears, had closed the credit door to Zimbabwe and was out
of the running to enter the platinum industry here. End
Summary.
———————-
4-Way Deal with Russia
———————-
¶2. (SBU) Zimplats CEO Greg Sebborn updated econoff on May 2
on the status of talks with the GOZ on “indigenization” of
the company’s platinum mines (ref B). Zimplats accepted the
need – “it’s only fair” – to release surplus ground (i.e.
undeveloped claims), but was demanding in return credit from
the GOZ toward looming black economic empowerment
requirements.
¶3. (SBU) President Mugabe wanted Zimplats to release ground
fast so that the GOZ could conclude a deal with Russia (ref
A) under which Air Zimbabwe would get Iyushin airplanes
(“50-yr. old planes,” in Sebborn’s words) in return for
Norilsk’s acquiring surplus ground from Zimplats. The ground
in question was worth US$150 million based on Zimplats’
acquisition price. Zimplats would get US$50 million either
in cash or in equity in the released ground plus an
empowerment credit for the foregone US$100 million.
¶4. (SBU) The GOZ wanted Zimplats to partner with Norilsk in
developing the ground and in constructing a platinum ore
processing plant in Zimbabwe, an arrangement that Zimplats
would consider only on purely commercial terms. Sebborn said
the GOZ was under the illusion that Norilsk would land in
Zimbabwe and immediately start constructing mines. Mugabe
did not realize there was no “quick win,” or that it took
US$100 million and three years to drill/set up one shaft and
build one small concentrator.
HARARE 00000563 002 OF 002
——————
Still Some Hurdles
——————
¶5. (SBU) Sebborn said a draft agreement was with the Minister
of Mines, and prospects were good for closing the deal.
However, Zimplats was demanding President Mugabe’s signature,
not that of Mining Minister Midzi and it was not yet clear
the GOZ would acquiesce. Zimplats would also need
shareholder approval. In that regard Sebborn said he had
cautioned the GOZ not to spin the deal to the press as
favoring the GOZ. A further hurdle, according to Sebborn,
was that Russia was insisting that Zimbabwe first conclude a
BIPPA, which the GOZ was resisting.
¶6. (SBU) Sebborn agreed that the deal under negotiation,
while good for Zimplats, was neither a model for other mining
companies nor good for the industry as a whole, as many
foreign-owned mining companies in Zimbabwe lacked surplus
ground to release in exchange for empowerment credit.
———————–
China’s Interest Waning
———————–
¶7. (C) With respect to Chinese interest in Zimbabwe’s
platinum sector, Sebborn said the Chinese had been piqued
that the GOZ had paid down its IMF GRA arrears but had failed
to make any debt payments to China. It had consequently shut
the credit door to Zimbabwe and was showing less interest in
investing in the country’s platinum reserves.
——-
Comment
——-
¶8. (SBU) The international outcry over GOZ plans to take over
majority share of foreign-owned mines (ref C), along with
Zimplats’ own quick lobbying efforts (ref B), appear to have
put the brakes on yet another economic policy calamity.
However, even though the described deal with Norilsk, if
accurately portrayed and brought to fruition, will probably
keep Zimplats in Zimbabwe and eventually further spur
platinum production, it is a piecemeal solution that fails to
address any of the fundamental investment climate problems in
Zimbabwe. Moreover, the mining industry as a whole will
likely not look favorably on the deal, preferring instead to
see the GOZ’s indigenization policy implemented with the
fully compensated transfer of no more than 30 percent of
foreign-owned mining equity to indigenous owners.
SCHULTZ
(32 VIEWS)
