Wednesday, March 08, 2006

Mine grab take three

For its part, the spirit of the empowerment ethic is something industry accepts, fully. For decades black Zimbabweans were denied ownership rights in a racially skewed ownership structure. Gradual changes occurred when Zimbabwe became independent and prohibitive legislation was lifted.

But the challenge has always been access to mineral rights in an industry monopolised by a handful of foreign companies and which requires mammoth capital outlays in exploration activities and equity stakes.

So it comes as no surprise that while the industry has supported the underlying objectives of the legislation – to address the racial and economic inequities of the past – mining houses have some grave reservations about the absence of a sensible funding proposition for 'indigenisation'.

"We are happy to ‘indigenise’ as soon as we know what the rules are," says Greg Hunter, Chief Executive Officer of Metallon Gold.

For the past three years, mining companies have struggled to find a suitable partner for meaningful ‘indigenisation’. Metallon Gold is one of South Africa's giant mining companies that have set base in Zimbabwe but is struggling to put together an empowerment deal. The group owns five gold mines in the country, How Mine in Bulawayo, Redwing in Manicaland, Shamva, Arcturus and Mazowe in the north with a production of 180 000 ounces per year.

"We currently have an agreement with a consortium called Manyame Consortium. But the reality behind that is that we are in the process of unwinding that agreement," says Hunter.

Manyame, comprising businessmen John Mkushi, Albert Nhau and banker Mthuli Ncube acquired a 30 percent stake in Metallon Gold Zimbabwe in 2003. Reports indicate that Metallon had offered the consortium $3mn to end their interest in the company, an offer the empowerment group rejected. But Hunter says the marriage cannot continue.

"As a company we absolutely remain committed to ‘indigenisation’. That (30) percentage has been set aside for an ‘indigenous’ partner and we will do something but we think it would be best for both parties that we move in our own different directions," he says.

"The truth of the matter is that they haven't paid for their stake. They paid for an initial tranche of a $1mn and they were going to pay for the rest through payment of dividends."

As things stand, the state has discretionary powers to enforce the concession of shares to black empowerment entities without a right to appeal to the courts and with the potential to undermine property rights.

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