Business / Companies
NewDawn, no assurances on successfully complying with Indigenisation laws
24 Feb 2012 at 11:20hrs | Views
New Dawn Mining says as a result of recent press reports relating to activities of the Company's Falcon Gold Zimbabwe Limited subsidiary and certain market developments relating to indigenisation matters in Zimbabwe, is providing a comprehensive update regarding the status of its proposed Plan of Indigenisation and related matters. The company said there can be no assurances that the it will be successful in its
efforts to comply with the Indigenisation laws and regulations under
commercially viable terms and conditions, or at all.
The company says a recent press report included erroneous assertions that New Dawn was improperly attempting to circumvent the indigenisation process in Zimbabwe by transferring the Chiutsa base metal block of claims to a newly-registered Zimbabwe subsidiary, Great Punch Investments. This report referred to actions taken in the normal course of business related to the Company's efforts to segment its mining operations in Zimbabwe in order to separate base metal exploration projects and gold mining, development and exploration properties and projects into different operating subsidiaries (one of which was Great Punch Investments).
It says the reason for the segmentation was for financing, management and operational purposes, as base metals are distinct and different sectors as compared to gold mining. Great Punch Investments is a wholly-owned subsidiary of Falcon Gold Zimbabwe Limited, so that, for all practical purposes, beneficial ownership of the claims in question is unchanged. This action involving entities under common control and effected at no consideration was instituted in order to more efficiently implement exploration and capital plans for any future development of the base metal claims. The evaluation of the base metal claims is at a preliminary stage, and any future exploration and development would be over a period of several years. Any additional work on these claims would be contingent on favourable exploration results, access to suitable financing, and other factors. Based on the geological information currently available, the Chiutsa claims do not form a material property for either Falcon Gold Zimbabwe Limited or for New Dawn.
This process is a normal internal corporate matter that resulted in no change in the overall ownership or operating control structure of the Company's business operations in Zimbabwe, and will have no effect on New Dawn's plans and efforts to comply with indigenisation requirements in Zimbabwe. New Dawn will continue to operate these subsidiaries in Zimbabwe that were formed for this purpose, in compliance with the law. Each of these Zimbabwe subsidiaries are required to be indigenised pursuant to the Indigensation legislation, and as wholly-owned subsidiaries of the Company's current operating subsidiaries in Zimbabwe, these newly-formed subsidiaries are automatically covered in the Company's current proposed Indigenisation Plan, and will be indigenised as part of the Company's final accepted Indigenisation and Implementation Plan.
The Government of Zimbabwe is in the process of implementing an indigenisation policy wherein all domestic businesses are required to be 51% owned by indigenous Zimbabweans. New Dawn's Zimbabwe operating subsidiaries, Casmyn Mining Zimbabwe (Private) Limited, Falcon Gold Zimbabwe Limited and Olympus Gold Mines Limited, are all currently non-indigenous companies for purposes of the Indigenisation and Economic Empowerment Act that was signed into law on March 9, 2008, and the related Regulations that were gazetted as Statutory Instrument 21 of 2010 issued on January 29, 2010.
On March 25, 2011, the Government of Zimbabwe gazetted the Minimum Requirements for indigenisation of the mining industry (the "Announcement"), which stipulated that each non-indigenous mining company with net assets in excess of US$1 was required to submit an indigenisation plan by May 9, 2011. The Announcement stated that each such mining company was required to dispose of 51% of its shares, less any percentage previously indigenised to qualified indigenous Zimbabwean companies or investors, to a "designated entity".
The Announcement defined a "designated entity" as any one of several specified state owned or controlled entities or an employee share ownership scheme. The Announcement also stated that the value of the shares to be transferred to a designated entity would be calculated on the basis of a valuation to be agreed upon by the Minister of Youth Development, Indigenisation and Economic Empowerment (the "Minister") and the non-indigenous mining company, and would take into account Zimbabwe's sovereign ownership of the minerals exploited or proposed to be exploited by the non-indigenous mining company.
The Company timely filed its proposed Plan of Indigenisation with the Zimbabwe Ministry of Youth Development, Indigenisation and Economic Empowerment in April 2011, and after initial discussions with the National Indigenisation and Economic Empowerment Board (NIEEB), subsequently amended its proposed Indigenisation Plan in May 2011. In August 2011, the Company signed a confidential Memorandum of Understanding (MOU) with the Ministry, acting through NIEEB, which established a broad-based framework for New Dawn to engage with the Government of Zimbabwe in respect of the structuring and implementation of its proposed Indigenisation Plan.
In this regard, subsequent to August 2011, a valuation firm was selected by NIEEB and the aforementioned valuation report was completed and submitted to NIEEB in early November 2011 and was used as a basis for further discussions. Based on the conclusions of the valuation report and the provisions contained in the MOU, New Dawn revised and updated its proposed Indigenisation Plan and submitted a proposed final Indigenisation and Implementation Plan on November 29, 2011. Subsequently, management of the Company met with Ministry and NIEEB representatives, and then with the Minister and NIEEB representatives, on January 16, 2012 and January 18, 2012, respectively, to further consider various issues relating to the structure and implementation of the Company's proposed final Indigenisation and Implementation Plan.
New Dawn's proposed Indigenisation Plan consists of several components, including engaging directly with various indigenous investors for an aggregate of approximately 36% of the equity in New Dawn. New Dawn, at the request of the Ministry and NIEEB representatives at the meeting on January 16, 2012, provided specific details as to New Dawn's four proposed indigenous investor groups, in order for such groups to receive certification from NIEEB as qualified indigenous investors into New Dawn. Since that meeting, New Dawn has not received any subsequent official written communications from the Ministry or from NIEEB.
Also included in the proposed Plan is the establishment of employee share ownership schemes and community trusts aggregating an approximately 15% equity share of the Company's Zimbabwe subsidiaries, thus facilitating broad-based participation in New Dawn's Zimbabwe mining operations by indigenous Zimbabweans.
The aforementioned process and the resulting proposed final Indigenisation and Implementation Plan reflect efforts to develop an Indigenisation Plan that would be acceptable to both the Government of Zimbabwe and to the Company's key stakeholder groups. Through fostering new capital investment by indigenous parties in the Company at fair value, New Dawn is seeking to fulfill its obligations to comply with the Indigenisation laws and regulations in a manner that is both socially and economically advantageous to indigenous Zimbabweans and commercially viable for the Company. The finalisation of the Company's Indigenisation Plan and the funding from these indigenous investor groups is expected to provide New Dawn with access to additional capital resources to support its efforts to increase annualized gold production to a monthly run-rate of approximately of approximately 100,000 ounces by December 2014.
New Dawn is continuing to engage in confidential discussions with the Government of Zimbabwe, through the Ministry and NIEEB, in an effort to resolve open issues and thus allow for the finalisation and subsequent implementation of the Company's proposed Indigenisation Plan.
The Company expects that the implementation of a final Indigenisation Plan will require compliance with various legal, securities, tax and regulatory issues, which may take several months or more to accomplish.
However, as there continues to be substantial uncertainty surrounding the implementation of the Indigenisation laws and regulations in Zimbabwe, there can be no assurances that the Company will be successful in its efforts to comply with the Indigenisation laws and regulations under commercially viable terms and conditions, or at all. The Company is currently unable to predict the effect of an inability to arrive at or implement an Indigenisation Plan that is acceptable to the Government of Zimbabwe. Further information will be provided to shareholders as and when such discussions have been concluded, or when developments otherwise warrant.
The company says a recent press report included erroneous assertions that New Dawn was improperly attempting to circumvent the indigenisation process in Zimbabwe by transferring the Chiutsa base metal block of claims to a newly-registered Zimbabwe subsidiary, Great Punch Investments. This report referred to actions taken in the normal course of business related to the Company's efforts to segment its mining operations in Zimbabwe in order to separate base metal exploration projects and gold mining, development and exploration properties and projects into different operating subsidiaries (one of which was Great Punch Investments).
It says the reason for the segmentation was for financing, management and operational purposes, as base metals are distinct and different sectors as compared to gold mining. Great Punch Investments is a wholly-owned subsidiary of Falcon Gold Zimbabwe Limited, so that, for all practical purposes, beneficial ownership of the claims in question is unchanged. This action involving entities under common control and effected at no consideration was instituted in order to more efficiently implement exploration and capital plans for any future development of the base metal claims. The evaluation of the base metal claims is at a preliminary stage, and any future exploration and development would be over a period of several years. Any additional work on these claims would be contingent on favourable exploration results, access to suitable financing, and other factors. Based on the geological information currently available, the Chiutsa claims do not form a material property for either Falcon Gold Zimbabwe Limited or for New Dawn.
This process is a normal internal corporate matter that resulted in no change in the overall ownership or operating control structure of the Company's business operations in Zimbabwe, and will have no effect on New Dawn's plans and efforts to comply with indigenisation requirements in Zimbabwe. New Dawn will continue to operate these subsidiaries in Zimbabwe that were formed for this purpose, in compliance with the law. Each of these Zimbabwe subsidiaries are required to be indigenised pursuant to the Indigensation legislation, and as wholly-owned subsidiaries of the Company's current operating subsidiaries in Zimbabwe, these newly-formed subsidiaries are automatically covered in the Company's current proposed Indigenisation Plan, and will be indigenised as part of the Company's final accepted Indigenisation and Implementation Plan.
The Government of Zimbabwe is in the process of implementing an indigenisation policy wherein all domestic businesses are required to be 51% owned by indigenous Zimbabweans. New Dawn's Zimbabwe operating subsidiaries, Casmyn Mining Zimbabwe (Private) Limited, Falcon Gold Zimbabwe Limited and Olympus Gold Mines Limited, are all currently non-indigenous companies for purposes of the Indigenisation and Economic Empowerment Act that was signed into law on March 9, 2008, and the related Regulations that were gazetted as Statutory Instrument 21 of 2010 issued on January 29, 2010.
On March 25, 2011, the Government of Zimbabwe gazetted the Minimum Requirements for indigenisation of the mining industry (the "Announcement"), which stipulated that each non-indigenous mining company with net assets in excess of US$1 was required to submit an indigenisation plan by May 9, 2011. The Announcement stated that each such mining company was required to dispose of 51% of its shares, less any percentage previously indigenised to qualified indigenous Zimbabwean companies or investors, to a "designated entity".
The Announcement defined a "designated entity" as any one of several specified state owned or controlled entities or an employee share ownership scheme. The Announcement also stated that the value of the shares to be transferred to a designated entity would be calculated on the basis of a valuation to be agreed upon by the Minister of Youth Development, Indigenisation and Economic Empowerment (the "Minister") and the non-indigenous mining company, and would take into account Zimbabwe's sovereign ownership of the minerals exploited or proposed to be exploited by the non-indigenous mining company.
In this regard, subsequent to August 2011, a valuation firm was selected by NIEEB and the aforementioned valuation report was completed and submitted to NIEEB in early November 2011 and was used as a basis for further discussions. Based on the conclusions of the valuation report and the provisions contained in the MOU, New Dawn revised and updated its proposed Indigenisation Plan and submitted a proposed final Indigenisation and Implementation Plan on November 29, 2011. Subsequently, management of the Company met with Ministry and NIEEB representatives, and then with the Minister and NIEEB representatives, on January 16, 2012 and January 18, 2012, respectively, to further consider various issues relating to the structure and implementation of the Company's proposed final Indigenisation and Implementation Plan.
New Dawn's proposed Indigenisation Plan consists of several components, including engaging directly with various indigenous investors for an aggregate of approximately 36% of the equity in New Dawn. New Dawn, at the request of the Ministry and NIEEB representatives at the meeting on January 16, 2012, provided specific details as to New Dawn's four proposed indigenous investor groups, in order for such groups to receive certification from NIEEB as qualified indigenous investors into New Dawn. Since that meeting, New Dawn has not received any subsequent official written communications from the Ministry or from NIEEB.
Also included in the proposed Plan is the establishment of employee share ownership schemes and community trusts aggregating an approximately 15% equity share of the Company's Zimbabwe subsidiaries, thus facilitating broad-based participation in New Dawn's Zimbabwe mining operations by indigenous Zimbabweans.
The aforementioned process and the resulting proposed final Indigenisation and Implementation Plan reflect efforts to develop an Indigenisation Plan that would be acceptable to both the Government of Zimbabwe and to the Company's key stakeholder groups. Through fostering new capital investment by indigenous parties in the Company at fair value, New Dawn is seeking to fulfill its obligations to comply with the Indigenisation laws and regulations in a manner that is both socially and economically advantageous to indigenous Zimbabweans and commercially viable for the Company. The finalisation of the Company's Indigenisation Plan and the funding from these indigenous investor groups is expected to provide New Dawn with access to additional capital resources to support its efforts to increase annualized gold production to a monthly run-rate of approximately of approximately 100,000 ounces by December 2014.
New Dawn is continuing to engage in confidential discussions with the Government of Zimbabwe, through the Ministry and NIEEB, in an effort to resolve open issues and thus allow for the finalisation and subsequent implementation of the Company's proposed Indigenisation Plan.
The Company expects that the implementation of a final Indigenisation Plan will require compliance with various legal, securities, tax and regulatory issues, which may take several months or more to accomplish.
However, as there continues to be substantial uncertainty surrounding the implementation of the Indigenisation laws and regulations in Zimbabwe, there can be no assurances that the Company will be successful in its efforts to comply with the Indigenisation laws and regulations under commercially viable terms and conditions, or at all. The Company is currently unable to predict the effect of an inability to arrive at or implement an Indigenisation Plan that is acceptable to the Government of Zimbabwe. Further information will be provided to shareholders as and when such discussions have been concluded, or when developments otherwise warrant.
Source - Byo24News
