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From time to time we have commented on the dire situation in Zimbabwe. We are a-political, non-racial and unbiased in our work. But we call a spade, a spade! In that spirit, we comment on the human tragedy reaching the pits in Zimbabwe at present.
In common with all other countries, Zimbabwe is defined by a line around a piece of land on the map. Within that area the government can do what it like and be free from any fear of interference from outside. From the bread basket of Africa where one Z$ equaled one U.S.$ to this:
Interbank Exchange Rate
Interest rates 07 /03/06
ZW$ 99,201.58 per US$1
Is what Mugabe and his policies have achieved. Over the last three decades, the present government has embarked on a programme that has resulted in the destruction of the economy and the financial well being of the country. The path to this end has been unimpeded by outsiders, with some shouting foul, but taking no real action. Today the country enjoys a rising level of unemployment, presently 85+%. Approximately, four million people are facing starvation, due to the results of the purging of the working class by AIDS leading to insufficient workers to harvest, to shortages of working capital, alongside the 'grabbing' of white owned farms [extremely well run and productive]. At worst, these farms now either don't function because they have been abandoned or produce so little as to be wholly inadequate to supply even their own nation. There have been good rains this year so there should be a decent harvest, but the policy of taking productive farms off white farmers has resulted in the turning of Zimbabwe from an exporter of food into a recipient of food aid from relief agencies.
Now the next move, which as a precious metals publication concerns us, is the proposed new policy of taking half the Zimbabwe mines, at least, to the government, an effective nationalizing of them. The mines most affected are Impala and Anglo Platinum, together with Acquarius.
Zimbabwean Minister of Mines Amos Midzi made the statement that the cabinet had approved draft proposals requiring mining companies to surrender 51% of their assets to the government and/or indigenous groups, depending on the commodity. The government would pay only for 26% and the remainder would be a "free carry." Midzi said alternative foreign investors had been identified to take up the equities in current mines if external shareholders did not co-operate. Whilst this may appear on the surface to be pure theft, with the [forced] acquiescence of the mines and their shareholders, that word could not apply, surely?
We have asked how they intended to pay for the equity portion they actually intended to pay for, in past issues. We can only answer in line with how they paid part of the I.M.F. bill of $210 million. They simply took it off Anglo Platinum and others and issued them with a promissory note [issued in the U.S.$ - surprisingly as in the past it was in the Z$] to pay them back sometime in the future. We expect the mines inside Zimbabwe to be issued with the Z$ payment for that balance of the shares they pay for. At the present rate of acceleration in Zimbabwe's inflation, they need only wait a year or two and they will be able to pay the price offered to the mines with one banknote, printed on one side only. But then again I suppose it is not pure theft if you are paid something for it, even if that payment is worthless?
The responses of these mines are:
Anglo Platinum Anglo Platinum (AngloPlat), noted "with concern" Zimbabwe's proposal that the country's mining law be amended to allow the state to hold 51% of all platinum operations in the country, AngloPlat said.
AngloPlat has almost all of its platinum mines in SA, but is developing the Unki platinum project in Zimbabwe. AngloPlat had spent U.S.$20m developing surface infrastructure including a dam and roads at the Unki project and was in the process of sinking a shaft, The feasibility study had put the mining operation at 120000 tons a month, with no grade or metal production from the mine forecast. Subject to project sanction, the Unki mine would achieve first production in 2008. The effect of the draft proposals would be less acute for AngloPlat than other platinum miners, as Unki was still at the project stage.
Implats "We believe the proposal is not in the best interest of developing a platinum industry in Zimbabwe, and we believe the percentage figures and ownership methodology are not consistent with previous discussions". The proposal would render Zimbabwe's existing platinum mines and any expansions "uneconomic", Implats chief financial officer David Brown said. Asked whether the Zimbabwe government's latest proposals would cause Zimplats to freeze a previously reported U.S.$2 billion expansion programme, Brown said it would be premature to discuss such a move because Implats did not believe the outcome would necessarily follow the proposals.
The second-biggest platinum miner, Impala Platinum, has an 86,7% stake in Zimplats and a 50% stake in the Mimosa mine, while Aquarius Platinum holds the other 50% in Mimosa.
Aquarius Platinum CEO Stuart Murray said the group's joint-venture, Mimosa platinum mine, was in the midst of a U.S.$14 million expansion programme, and Aquarius had no intention of halting that expansion.
Metallon Group head of corporate affairs Nonkqubela Maliza said Metallon did not believe the proposals would go through in their current form. If they did, it would be disastrous for Zimbabwe's economy. However, Metallon Gold had already allocated 30% of its assets for indigenous partners, and was in negotiations with potential partners, Maliza said. [Metallon Gold owns five mines in Zimbabwe and two exploration projects. It is the country's biggest gold miner.]
If the mines do not acquiesce we would expect the new shareholders to be Chinese [?] and they would pay only for the portion they receive. One more step in the transfer of power to the East if that happens.
It has to be said that both Impala and Anglo Platinum are sufficiently large to weather this storm without affecting current income. This is simply a blot on their future prospects.
As we said some months ago, any Zimbabwe assets on their Balance Sheet should be deemed of zero value to them. We hold to that until proved by a different reality.
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