Local miners still wary of Zimbabwe’s waters

Mark Cutifani, the CEO of Anglo American, described Chris Griffith, his counterpart at the 80%-owned listed subsidiary Anglo American Platinum (Amplats), as “keen as mustard” to explore fresh prospects in Zimbabwe, which has recently thrown its doors open to investment.  

But perhaps the mustard is only mild.   

Cutifani and Impala Platinum CEO Nico Muller are cautious about how a change of president in Zimbabwe might actually alter policy towards foreign investment.

The initial euphoria after the toppling of former Zimbabwe dictator Robert Mugabe has been replaced by watchfulness in the markets, especially by the mining companies, who have seen it all before.  

“With Zimbabwe, it’s still a bit too early,” said Cutifani at the group’s full-year results presentation in February.

“We have only one asset there – Unki – but it is a very good asset. But what the world of platinum group metals [PGMs] doesn’t need right now is more production. So we will watch that one carefully,” he said.  

What’s also unclear is how Zimbabwe intends to adapt its indigenisation policy to suit new or continued investment.

The indigenisation process requires foreign mining companies to transfer 51% of their shares to the Zimbabwean government, some of which it will keep and some of which it will distribute to communities and trusts.

Impala’s Muller said earlier this month: “Fifty-one percent is not part of the position we currently have, and it is not part of our position with the [Zimbabwe] government now.”  

Alex Mhembere, CEO of Zimplats, in which Implats has an 80% stake, believes new Zimbabwean President Emmerson Mnangagwa is prepared to see indigenisation completed either through a transfer of shares or value by other means, such as other economic contributions.

“There is discretion for the minister to switch from equity to economic development such as a re-industrialisation focus,” said Mhembere.

This means that changes Implats/Zimplats might make to allow for import substitution as well as supporting local suppliers through advanced procurement practices, would be looked upon favourably. “We’ve had a number of discussions in that regard,” said Mhembere.  

What’s not possible, it seems, is for Zimplats to build a refinery as demanded by the Zimbabwean government under Mugabe’s rule.

Waving a stick rather than a carrot, Zimbabwe threatened to impose a 15% export levy on “unbeneficiated exports of PGM concentrate” if companies such as Zimplats did not comply.

Muller has threatened to close Zimplats if such a levy were to be imposed (although it has been postponed twice, much like South Africa’s carbon tax, due now in 2019).  

However, he does think it’s probably time the PGM industry in Zimbabwe collaborated on refining PGM concentrate there. The question is, how exactly? Again, simple solutions are not on the table.

Pallinghurst Resources, the Johannesburg-listed investment-turned-operating company, extracted an agreement from Zimbabwe’s cabinet – while it was under Mugabe’s rule – to impose the adoption of its patented Kell technology on all PGM players.

This is a new way of refining PGM concentrate at a snip of the $1bn normally required to build a refinery; with Kell, a requirement of some $90m to $100m in capital expenditure has been estimated per module.   

The idea is that, once built by the chaps at Pallinghurst, assisted by the Industrial Development Corporation and the Zimbabwe Mining Development Corporation, mining companies will be obliged to supply their PMG concentrate, thus avoiding the export levy.

But PGM firms don’t trust the process; not yet. Amplats’s Griffith is already on record as saying Kell has yet to be commercially proven. Implats’s Muller has a similar view.  

According to Muller, the technology sacrifices the recovery of precious metals in favour of base metals, which may not be the optimal commercial equation. “We are still finding it difficult understanding how Kell can achieve the claims made for it,” he said.

“We are entering a process of trying to get closer to the technology. We can’t be forced to give up economic value to the Zimbabwe government by adopting this process.” 

This article originally appeared in the 15 March edition of finweek. Buy and download the magazine here.

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