Business / Companies
Zimbabwe indigenisation haunts New Dawn
20 Sep 2013 at 09:23hrs | Views
TORONTO-listed New Dawn Mining Corp says the economic and business climate in Zimbabwe continues to deteriorate and the risks to the company's assets and operations in Zimbabwe are increasing commensurately.
In a statement to shareholders, New Dawn said that a major underlying factor contributing to the Company's current difficulties has been the more than two year delay in the still incomplete approval process for the Company's proposed Plan of Indigenisation.
Approval of the Company's Plan of Indigenisation had been expected to provide the Company with access to sufficient investment capital over a period of time, predominantly from international sources, to fund the development and expansion of more cost efficient mining operations in Zimbabwe.
"With the heightened uncertainty surrounding the implementation of indigenisation policy in Zimbabwe subsequent to the July 31, 2013 national elections, there is the likelihood of an increasingly negative effect on the Company and thus on its stakeholders," said the statement.
Recent public statements in Zimbabwe imply there may be an evolving policy on indigenisation focusing on seizing 51% controlling interests in foreign controlled mines, with compensation deemed to be the intrinsic value of the minerals in the ground. The implementation of such an indigenisation policy would further deter foreign direct investment in Zimbabwe and thus make it even more difficult for the companies to raise additional capital through the public markets to fund its development and expansion projects, on which future profitability is dependent.
New Dawn said it is currently unable to predict the effect of an inability to conclude or implement a Plan of Indigenisation acceptable to both the Company's stakeholders and the Government of Zimbabwe. However, such failure could result in the termination of the Company's mining licenses in Zimbabwe, the loss of ownership and/or control of the Company's assets and operations in Zimbabwe without monetary compensation, other sanctions against the Company's Zimbabwe operations or subsidiaries, some combination of these actions, or some result currently unknown or unforeseen.
New Dawn fears that there is a significant and increasing risk that actions more severe than the steps taken or contemplated so far may be required or forced on the Company. It says such actions could include the sale or liquidation of the Company and its assets in a formal or informal process.
In a statement to shareholders, New Dawn said that a major underlying factor contributing to the Company's current difficulties has been the more than two year delay in the still incomplete approval process for the Company's proposed Plan of Indigenisation.
Approval of the Company's Plan of Indigenisation had been expected to provide the Company with access to sufficient investment capital over a period of time, predominantly from international sources, to fund the development and expansion of more cost efficient mining operations in Zimbabwe.
"With the heightened uncertainty surrounding the implementation of indigenisation policy in Zimbabwe subsequent to the July 31, 2013 national elections, there is the likelihood of an increasingly negative effect on the Company and thus on its stakeholders," said the statement.
Recent public statements in Zimbabwe imply there may be an evolving policy on indigenisation focusing on seizing 51% controlling interests in foreign controlled mines, with compensation deemed to be the intrinsic value of the minerals in the ground. The implementation of such an indigenisation policy would further deter foreign direct investment in Zimbabwe and thus make it even more difficult for the companies to raise additional capital through the public markets to fund its development and expansion projects, on which future profitability is dependent.
New Dawn said it is currently unable to predict the effect of an inability to conclude or implement a Plan of Indigenisation acceptable to both the Company's stakeholders and the Government of Zimbabwe. However, such failure could result in the termination of the Company's mining licenses in Zimbabwe, the loss of ownership and/or control of the Company's assets and operations in Zimbabwe without monetary compensation, other sanctions against the Company's Zimbabwe operations or subsidiaries, some combination of these actions, or some result currently unknown or unforeseen.
New Dawn fears that there is a significant and increasing risk that actions more severe than the steps taken or contemplated so far may be required or forced on the Company. It says such actions could include the sale or liquidation of the Company and its assets in a formal or informal process.
Source - businessdaily
