Chinese platinum processing plant in Zimbabwe a concern: Zimplats

Zimbabwe Platinum Mines former CEO G. Sebborn told the American Ambassador that the company was open to expanding its Zimbabwe operations despite ongoing political and economic turmoil. However, the additional investment would be conditioned upon the government of Zimbabwe guarantees regarding land tenure and the scope of required indigenization. Sebborn also expressed concern over the effects of new Chinese mining investments. This was revealed in the Wikileaks cables.
 
Sebborn stated that Zimplats had presented a ten-year, $2 billion investment proposal to the government of Zimbabwe.
 
Sebborn noted that at $900/ounce, platinum investments should prove profitable even amid Zimbabwe's economic and political turmoil. According to Sebborn, South Africa and Zimbabwe were the two largest potential suppliers of platinum, with Zimbabwe's platinum easier to access.
 
Economic Turmoil: The Chinese Factor 
The former Zimplats CEO told the American envoy that several Chinese investors had visited his offices seeking partnerships in new mining projects. None of these potential investors came back with a concrete proposal. However, Sebborn had heard through other sources that some Chinese investors planned to build a platinum processing plant. He expressed concern that the Chinese lacked the required expertise to build a plant on par with those in South Africa and other western countries. Moreover, he said the government would likely force Zimplats to send its platinum to the new plant for processing. This, Sebborn stated, would either result in poorer grade platinum or extend the revenue chain as platinum is sent first to the local plant and then to the South African plant. It would also reduce Zimplats' leverage with the government and lessen its ability to protect its investment here, since the best processing plants were all in western countries that could be relied on to react negatively to government's expropriation efforts.
 
Sebborn speculated that the recent rash of Chinese interest in the mining sector resulted from special concessions from the government. He also opined that the Chinese could be betting on a pay-off in the long-term, in a post-Mugabe Zimbabwe. Sebborn noted that starting a new mine or processing plant involved massive upfront sunk costs and subsequent adequate activity to be viable- activity that Zimbabwe's current platinum production levels could not support.
 
Amidst Zimbabwe's continuing economic and political turmoil, there remain areas of potentially profitable economic activity, including especially mining. Nonetheless, the government's imperative to consolidate and expand its control over the nation's economy will continue to hamstring efforts by even the bravest and strongest players to move forward.

Empowerment
Zimplats is currently in talks with the Zimbabwe government on how to sell 51% stake to local black Zimbabweana. Last week, the company said it will submit a new proposal to sell a majority stake in the company by November.

"A proposal was made and it's all part of negotiations with the government," Muchadeyi Masunda, deputy chairman of Zimplats, said by phone today from the capital, Harare. "I am not aware of any violent objections to it."

The first proposal by Zimplats failed to meet Zimbabwe's empowerment laws and may result in the company having its mining license revoked, Indigenization Minister Saviour Kasukuwere said on Sept. 7.

Impala's Chief Executive Officer David Brown during results presentation on August 26 advise analysts that selling 51 percent of Zimplats "just does not work,". He was adamant that the company will not sell the controlling stake to blacks.