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Zimplats project uncertain over indigenisation 20/02/2010 00:00:00 by
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Clarity ... David Brown
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IN a major fall-out from the controversy surrounding governments indigenisation policy, Impala Platinum has threatened to call-off any further expansionary investment at its Zimbabwe operations pending clarification over the issue and resolution of other outstanding" matters.
The South Africa-based platinum major holds an 87 percent interest in Zimbabwe platinum mines (Zimplats) which owns three underground mines at Ngezi as well as the Selous Metallurgical Complex, located some 77 kilometres north of the mines.
In addition Implats also hold a 50 percent interest in the smaller Mimosa platinum mine located in the Midlands town of Zvishavane.
The company announced in its financial results released on Thursday that the Zimplats Phase 1 expansion programme implemented at a cost of more about US$340 million has now reached full production.
However chief executive, David Brown told a South African mining publication that while feasibility studies for the second phase expansion programme - expected to cost up to US$500 million - was being completed, implementation depended on resolution of outstanding issues including the (recent) indigenisation statements.
"As far as the indigenisation legislation is concerned, this is not new. It's been around for some years and we did a release-of-ground agreement in 2006 with this legislation in mind, because we knew that it was pending.
"Certainly our understanding is that we would probably look at an equity participation of between 15% and 26%, which is more-or-less in line with what we anticipated and we're quite comfortable with that level of equity.
"The balance to get to 51% will be made up through other means; one of these means being the release of ground, which we believe could have a fairly significant contribution to the credit to make up that differential.
The other would be credits for social expenditure and infrastructural expenditure, and we believe we have a percentage covered by those items as well, Brown said.
Implats entered into an agreement with the government in May 2006 under which the company released 36 percent of its resource base in return for 19.5 percent empowerment credits as well as a cash credit of US$51 million.
Under the agreement, should the government fail to pay the cash sum the company would then get a further 10 percent in empowerment credits.
Brown said the Implats now required further clarification over the deal following the recent publication of regulations regarding implementation of the countrys indigenisation legislation by empowerment minister, Saviour Kasukuwere.
The regulations, among other things, set out the time frames within which companies will be required to cede 51 percent of their equity to indigenous Zimbabweans.
"What we require is some clarity on the issue, and we need to make sure one more time that the release-of-ground agreement that we have with the Zimbabwe government is as envisaged and is included in the legislation.
It doesn't say that it's not included, but on the other hand it also doesn't specifically make allowance for it. I hasten to add that we are not anti indigenisation and we do have plans in place to address the proposed legislation, however we do seek additional clarity around this matter," Brown said.
Implats also wants the government of Zimbabwe to clarify the matter of sums owed to Zimplats by the Reserve Bank of Zimbabwe (RBZ).
"There are also a number of other issues we would like to get some clarity on; one is obviously on the debt with the Reserve Bank of Zimbabwe. Zimplats is owed about US$34-million and we want to get some kind of view in terms of acknowledgement of debt and some kind of repayment schedule over a period of time.
"But, I hasten to add that that money won't be paid in a short period of time. You've got an economy of Zimbabwe that's battling and you've got a government that is struggling to raise additional funds. But this is something we want to work at, and also obtain clarity on the indigenisation process, Brown said.
The company is looking to the low-cost Zimbabwe operations to achieve its goal of ramping up production to more than one million ounces of platinum per year.
However management warns that if clarification over the outstanding issues with the Zimbabwe authorities is not forthcoming the board would consider diverting the planned investment elsewhere.
zibabwe.com
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