21/08/2011 00:00:00by Gilbert Nyambabvu
Contract binding ... David Brown
IMPALA Platinum – which owns Zimbabwe Platinum Mines (Zimplats) -- has insisted that the government honour the terms of an empowerment deal reached in 2006 as a cabinet minister threatened to cancel the company’s operating licence.
Empowerment Minister, Saviour Kasukuwere has given Zimplats and a number of other foreign firms operating in Zimbabwe 14 days to submit indigenization proposals complaint with the country’s laws or risk having their local assets seized by the government.
Foreign firms operating in the country are no required by law to give up at least 51 percent of their equity as part of measures aimed at economically empowering the historically disadvantaged black majority.
However, Impala, which owns 87 percent of Zimplats and has a 50 percent interest in Zvishavane-based Mimosa Platinum Mine – insists the three-part plan it has already submitted is compliant with the law.
Implats chief executive, Dave Brown said the plan involves a 26 percent equity transfer with the balance (to reach 51 percent) made of social investment projects and a prior agreement with the government.
“We reckon that’s somewhere between 25 percent and 26 percent – we’re quite happy with that. Still, people should understand there are real cost associated to that. If people give you a cheque up front there would be no cost associated,” Brown told mining publication, miningmx.com.
“But in reality that’s not going to happen. Such a deal would usually entail some deferred payment method, using dividends or methodology to repay the purchase price. There is a cost associated to that. Us bearing that cost is part and parcel of our commitment to empowerment.”
He also insisted that a 2006 deal under which the company gave up 36 percent of its mineral resource in Zimbabwe in return for so-called credits should be honoured.
“There was a lot of emotion about those agreements. But we have a valid contract, we have a binding contract and that contract is in essence what I’d like to see honoured," he said.
“Because if that contract is honoured I’d certainly believe it would create a great faith that contracts and promises would be honoured. At the time when we discussed these matters it was accepted it would be taken into account.”
Still, Kasukuwere has said previous empowerment deals will not be considered adding offers for so-called social investments were also off the table.
However, Brown says he is not overly worried by what he considers political rhetoric.
"I think at the end of the day politicians will always indulge in populist rhetoric. I get that. I understand that’s their job mandate," he said.
“The President (Robert Mugabe) himself said on several occasions we are a model investor. He’s appreciative of our involvement in the social fabric of the country. That’s providing jobs, trying to enhance infrastructure and also various social projects in the areas we mine.”
A second phase expansion of Zimplats expected to cost US$450 million is already under way and involves building a third underground mine and a second concentrator at Ngezi, which will lift output to 270 000oz/year when the project reaches steady-state production levels in 2014.
“The sooner we can get clarity and finality (on indigenization) the better it is for investment,” Brown said.
“We have phases. We’re almost at full production at phase one. At phase two we’d ramp up by 2014. And then we’d be looking at phase three. And phase three would be quite a considerable investment. We’d be talking potentially of a $1bn capital injection.”