IMPALA Platinum (Implats), the world’s second-largest platinum producer, has bowed to pressure from the Zimbabwean government to sell a majority stake of its Zimplats subsidiary to Zimbabweans.
Impala said on Friday that it had agreed to sell 51 percent of Zimplats to the Zimbabwean government for $971 million (R8.3 billion) to comply with the country’s laws.
Zimbabwe, which has the largest platinum reserves after South Africa, introduced the indigenisation policy in 2010. It requires foreign-owned companies to give up a majority share to locals.
The deal is expected to be finalised by the end of June.
Implats chief executive Terence Goodlace said: “This agreement underlines our commitment to good corporate citizenship and lays the foundation for the creation of a sustainable Zimbabwean mining company capable of attracting the investment needed to deliver future benefits to our shareholders, the people of Zimbabwe, our employees and the local community.”
Goodlace said the company had confidence in Zimbabwe and was committed to a $460m expansion at Zimplats.
“I am, during these uncertain economic times, excited about the future of Zimplats and platinum mining in Zimbabwe,” he said.
“The uncertainty that has dogged Zimplats during the negotiations is now hopefully a thing of the past.”
Zimplats will continue to manage the company. The 51 percent stake will broken up as follows: 10 percent to be sold to the Zimplats Mhondoro-Ngezi Chegutu Zvimba Community Share Ownership Trust for the benefit of communities surrounding the operations; 10 percent to be sold to an employee share ownership trust; and 31 percent to the National Indigenisation and Economic Empowerment Fund.
Zimplats will fund the local entities at an interest rate of 10 percent a year.
The financing will be repayable from 85 percent of the dividends declared by Zimplats on the indigenisation shares.
“Despite immediate earnings dilution associated with the Zimplats ownership development, we contend that clarity regarding ownership structures may provide Zimplats with sufficient confidence to commit to additional future expansions,” SBG Securities analyst Justin Froneman said in a note to clients.
Implats’ shares fell as much as 1.9 percent on the JSE on Friday, before paring some losses to end the day 1.43 percent down at R172.50.
“If I were an Impala shareholder I would not be impressed,” Vestact director and investment manager Sasha Naryshkine wrote in an e-mailed note to clients.
“Impala’s revenue from the government will diminish. Basically they hold the risk of the entire mine but only own 49 percent of the asset.”
Zimplats’ operations comprise three underground mines, two concentrators and a smelter. Annual output is about 180 000 ounces of platinum.
The Zimplats phase 2 expansion project is currently under way and will raise production to 270 000 ounces in 2015.
The agreement follows a similar deal sealed last month by Aquarius Platinum and Implats to cede a majority stake in Mimosa Investment Holdings, a 50-50 joint venture between Implats and Aquarius that owns and manages the Mimosa mine in Zimbabwe.
The 51 percent stake was sold at $550m based on an agreed market value of $1.078bn. Interest on the funding was agreed at 9 percent.
Anglo American Platinum agreed to sell a majority stake in its Unki mine to Zimbabweans in a $142.8m deal last November.
Saviour Kasukuwere, the Indigenisation Minister, said at the Zimplats signing ceremony that foreign banks were also in the crosshairs and would be forced to comply with the law. – Additional reporting by Bloomberg and Reuters