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When Mugabe rants South African platinum stocks sneeze

by Byo24News
28 Mar 2011 at 14:25hrs | Views
Platinum stocks with significant exposure to Zimbabwe lost some of their shine on Monday as investors mulled over the implications of legislation requiring 51% of shares to be locally owned in terms of the Indigenisation and Empowerment Act.
While the Act was gazetted in 2007, requirements for the implementation of the Act, and its supporting regulations as they pertain to the mining sector, were only announced last Friday in the Zimbabwe Government Gazette.
The notice in the gazette calls for all non-indigenous mining businesses to submit indigenisation implementation plans to the government within 45 days of the date of the notice. Once approved, the plan must be implemented within six months.
Unsurprisingly, the stocks most heavily affected were Aquarius Platinum and Impala Platinum. Aquarius has a 50% stake in the Mimosa Mine in Zimbabwe, while Impala controls 87% of Zimplats, which owns the other half of Mimosa and has other platinum interests on Zimbabwe's Great Dyke.
At about 15:15, Aquarius' shares were 7.1% lower than Friday's close at 38.10 rand a share, while Impala's shares were 3.5% lower at 189.50 rand after reaching an intraday low of 186.60 rand.
"It's definitely fallout from the Zimbabwean announcement, combined with some overnight weakness in the price of platinum, which has come off by about 1%," said a trader at PSG Konsult.
While other platinum stocks - such as Anglo Platinum, Lonmin, Northam and Royal Bafokeng Platinum - were also weaker on the day, their falls were much more marginal.
Although Anglo Platinum is invested in the recently opened Unki platinum mine in the Shurugwi complex in Zimbabwe, this is a tiny portion of its overall platinum and platinum group metals interests in SA.
On the other hand, Zimplats, which Impala first acquired an interest in from Australia's Delta Gold in 2001, is far and away Zimbabwe's biggest platinum play, with mineral resources of 107 million ounces and reserves of 11.8 million ounces. It produced 137,900 ounces of platinum in matte in financial 2010 and has expanded its output capacity to 180,000 ounces a year.
Aquarius is also fairly heavily exposed to Zimbabwe as the Mimosa Mine produced 199,625 platinum group metal ounces in financial 2010. It is the lowest cost producer in Aquarius' stable of mines, the remainder of which are in SA.
In its reaction to the Zimbabwean notice, Aquarius said its Zimbabwean operating subsidiary "is engaged in discussions with the relevant authorities in order to establish a position that will be compliant with the Act and beneficial to stakeholders".
Impala Platinum's spokesman could not be reached for comment, but the following statement exists in a November 2010 fact sheet in the Zimplats section of the company's website: "Zimbabwe's indigenisation requirements were gazetted in early 2010 and require foreign companies to indigenise 51% of shares or interests in five years. Zimplats has submitted proposals to government in this regard but no clarity has yet been received."
Meanwhile, an important part of the Zimbabwean government notice relates to the valuation process.
The notice states that "the value of the shares or other interests required to be disposed of to a designated entity shall be calculated on a basis of valuation agreed to between the minister and the non-indigenous mining business concerned, which shall take into account the state's sovereign ownership of the mineral or minerals exploited or proposed to be exploited by the non-indigenous business concerned".

Source - Byo24News