MAC: Mines and Communities

Zimbabwe accepts $550m empowerment deal for Mimosa platinum mine

Published by MAC on 2013-01-07
Source: The Standard, News Day, Business Day

Zimbabwe accepts $550m empowerment deal for Mimosa platinum mine

By Tawanda Karombo

Business Day

14 December 2012

HARARE - Zimbabwe has accepted Aquarius Platinum's indigenisation compliance plan for the Mimosa mine, which it jointly owns with Impala Platinum, although the new shareholders will have to abide by obligations to provide funding for the company when the need arises or risk having their stakes diluted.

President Robert Mugabe and his Zanu (PF) party are spearheading the empowerment policy and resolved at the party's conference last week to intensify the drive to have foreign owned companies comply fully with the policy. The law compels foreign companies to cede a 51% shareholding to black Zimbabwean groups.

Platinum mining companies in Zimbabwe have been pressured to comply with the law and honour their indigenisation plans. Zimplats said this week that it had submitted a revised plan making provision for payment of its proposals, while Anglo American Platinum's Unki mine has also concluded an indigenisation deal with the government.

Aquarius Platinum CEO Jean Nel said compliance with the empowerment law would "offer Mimosa security of tenure". He said Mimosa had committed to complying with the Zimbabwean law as a "true reflection of the worth of our investment in Mimosa", which he described as a valuable asset and one of the lowest-cost producers in the platinum group metals sector globally.

Under the agreement Mimosa will cede 51% ownership to indigenous Zimbabwean groups for $550m. This has been calculated at an "agreed" market value of $1.078bn for the Mimosa mine.

Mimosa has agreed to provide funding for this through a vendor-financed loan vehicle as part of efforts to facilitate the smooth conclusion of the transaction over a period of 10 years.

"This loan will bear interest at a rate of 9% annually and will be settled through the waiver of the right to receive 90% of dividends due to the indigenous entities in favour of Mimosa. Any loan balance outstanding at the end of the 10-year period will be payable in cash," Mimosa said in its statement.

Mimosa appears to have broken with tradition after clearly stipulating in its plan that future funding for the mine's operations and capitalisation, where necessary, would be provided by all shareholders, including the indigenous Zimbabwean groups empowered under the transaction.

"To the extent that shareholders cannot or do not comply with their funding obligations, Mimosa Investments may fund any shortfall, which may lead to dilution," it said.

The company's plan shows that a 10% shareholding will be given to the Zvishavane Community Share Ownership Trust, which is held by communities in the area around which Mimosa operates. Another 10% will be ceded to the Mimosa employee share ownership trust.

The company will also give up 31% of its shareholding to the National Indigenisation & Economic Empowerment Fund.

Zimbabwean Empowerment Minister Saviour Kasukuwere confirmed the government had accepted Mimosa's indigenisation compliance plan. "I am pleased to say Mimosa Investment's indigenisation plan reflects the spirit and letter of Zimbabwean law and signals we welcome Aquarius as an investor to Zimbabwe," he said.

Army backs Kasukuwere

Report by Bernard Mpofu, Chief Business Reporter

News Day

15 December 2012

DEFENCE minister Emmerson Mnangagwa yesterday said the army is backing Zanu PF's controversial empowerment programme being spearheaded by Indigenisation minister Saviour Kasukuwere.

Addressing delegates at the signing ceremony of the terms of agreement for an empowerment plan between platinum miner Mimosa Mining Company and government, a tough-talking Mnangagwa pledged to support the policy which compels foreign-owned companies to cede 51% of their shareholding to locals.

Mimosa is a joint venture between Australia Stock Exchange-listed Aquarius Platinum and Impala Platinum of South Africa.

Mnangagwa's remarks come barely a week after his Zanu PF party resolved to step up the empowerment crusade ahead of watershed elections slated for next year.

"You may be wondering what the Minister of Defence is doing here," he said.

"Firstly, I hail from Zvishavane and those who doubt Cde Kasukuwere now know that the army is behind him.

"If there are any people who doubt that the time will come to review the (indigenisation and empowerment) policy, the answer is no!

"The best thing is to join them if you can't beat them.

"If an investor is not comfortable with our policy, we will assure them that our platinum will not be rotten over the years.

"It will stay under the ground until we find the right technology ...

"The purpose of an investor is to make profit, not loot ... I say things as they are because of my background.

"I try to be diplomatic, but it's difficult."

Under the agreed empowerment plan, Mimosa will relinquish 31% to the National Indigenisation and Economic Fund, and 10% apiece to the Zvishavane Community Share Ownership Scheme and an employee share ownership scheme.

Speaking at the same function, Kasukuwere tried to allay investor fears although he warned that government would rein in on non-compliant firms.

"The process that we have started will not be chaotic," he said.

"There is no reason to employ a strategy that is barbaric. The law is there and it should be followed.

"However, it doesn't mean that we will send roses to companies that do not follow the law. We do not grow roses."

The Prime Minister Morgan Tsvangirai-led MDC-T, a partner in the country's shaky coalition government, criticises the modus operandi of the empowerment programme, arguing that the policy will scare away investment.

There are indications that the military wants to play a prominent role in Zanu PF's election campaign.

Zimbabwe Defence Forces Commander General Constantine Chiwenga has reportedly dangled $2 000 a month to war veterans to join Zanu PF's campaign.

Mimosa partners to pick up RBZ's US$57m bill

Ndamu Sandu

The Standard

16 December 2012

MIMOSA'S indigenous partners are set to pick up the US$57 million bill incurred by the Reserve Bank of Zimbabwe (RBZ), according to documents obtained on Friday.

RBZ owed Mimosa US$57 million and a host of other miners as well as organisations after raiding Foreign Currency Accounts to meet the country's critical needs prior to the use of multi-currencies in 2009.

On Friday, Mimosa - a joint venture between Implats and Acquarius - and indigenous partners signed agreements that would allow indigenous partners to acquire 51% of the platinum producer in a transaction valued at US$550 million.

The move to sell the shareholding to locals ensured that the platinum producer complied with the Indigenisation Act.

The Mimosa transaction would result in the National Indigenisation and Economic Empowerment Fund taking up a 31% stake in the platinum producer, Zvishavane Community Share Ownership Trust (10%) and Mimosa Employees Share Ownership Trust (10%) in a purchase price of US$493 million.

After factoring in the RBZ debt, the transaction would cost US$550 million.

According to documents obtained on Friday, the agreed valuation of Mimosa by the NIEEF, Implats and Acquarius was US$1,148 billion. The value of the transaction, before taking into account the resource value, was US$585 million. The indigenisation discount was US$93 million, leaving the transaction at US$493 million.

The buying of the 51% would be financed through forfeiting of dividends by the indigenous shareholders. Under a notional vendor financing, Mimosa would allow the indigenous partners to buy shares without paying for them upfront with payment made through deducting future dividends over a specific period of time.

Information obtained from documents at hand showed that Mimosa has been getting a net profit after tax per annum of US$120 million since 2010.

Sources said the indigenous partners have committed to use 90% of the dividends to pay for the shares.

According to the breakdown of the transaction, the deal will see indigenous entities receiving 10% of the 51% share of their dividend declared by the platinum producer during the tenor of the notional vendor financing.

"Assuming a 50% dividend payout ratio per year on maintainable profits of US$100 million, this will result in indigenous entities receiving annual cashflows of approximately US$2,5 million with significant potential for growth," the documents said.

It said the transaction achieves the raising of acquisition finance of US$550 million through the notional vendor financing structure under difficult global economic conditions in capital markets.

A representative of the Mimosa foreign shareholders Gerhard Potgieter, said the transaction was the biggest value indigenisation agreement signed to date in the history of the country.

Critics of the indigenisation plan say it is an election gimmick that hinders the flow of foreign direct investment into the country.

Saviour Kasukuwere, the man behind the crusade said he was merely implementing the law that would allow indigenous Zimbabweans to have a slice of the national cake.

‘Zim needs own platinum refinery'

Mines and Mining Development permanent secretary Prince Mupazviriho said the parties should go beyond the agreement on share transfers and urged the shareholders to ensure that there is refinery in the country.

"We want to get to a stage where we have got platinum refinery in the country. In 2013 we must frantically work to ensure that we have achieved that," Mupazviriho said.

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