Zimbabwe's $4,2bn platinum deal in limbo

DODGY investment firm Karo Resources, which was controversially allocated vast platinum claims previously held by Zimplats ostensibly to set up a US$4,2 billion plant - a figure which it later disowned to the Zimbabwe Independent suggesting it was a government fabrication - says the murky project is not yet bankable.

After years of angling to gain control of a portion of the mineral-rich Great Dyke, Karo, owned by controversial busineman Lucas Pourolis, was finally given the green light by President Emmerson Mnangagwa to exploit platinum in Zimbabwe, although details of how the murky project will be financed remain opaque.

Karo has managed to mobilise only US$8 million from Tharisa Plc - a company in which the Pourolis family holds a 42% stake to extract and process platinum strewn across claims stretching over 23 903 hectares.

Tharisa CE Phoevos Pourolis said Karo was now considering taking up an equity partner as one of the financing strategies of the "multi-billion dollar project" which is however yet to be finalised into a "bankable" venture.

"When the company was first linked with the investment in May, there were suggestions the mine and processing facilities would cost US$4,2 billion producing 1,4 million ounces of PGM (platinum group metals) by 2023. The resource has to back up the project. It has 96 million ounces in reserves as per Zimplats' drill results, but we have to verify that and get the project into a bankable state.

"It is certainly an option (finding an equity partner). We have a lot of synergy and co-operation with all the PGM (platinum group metals) producers, so it is something we would discuss," Pourolis told a mining publication this month.

In July, Tharisa Plc senior partner Bobby Morse told the Independent on the sidelines of the platinum project ground-breaking ceremony that the Johannesburg Stock Exchange and London Stock Exchange-listed firm was still going through the preliminary stages of the deal and could not yet precisely determine the specific amount of financial resources required to implement the project, triggering questions as to how the US$4,2 billion figure came about.

"That US$4,2 billion is something that the government mentioned, not Tharisa, not Karo; it is a government number, we do not have a number, but it is going to be a few billion, we are at a very early stage," Morse told the Independent then.

"We have started the drilling, we have drilled one hole, there are many more holes to come, so thereafter once we have actually proven that we have the resource and in the meantime there is also other work streams going on, on how best to build this operation."

The Pourolis family, which is close to Mnangagwa and is notorious for speculative business schemes, has been making power play moves in Zimbabwe after acquiring significant shareholding in Karo Mining Holdings, in a related inter-party transaction, ahead of the expected investment in chrome exploitation, platinum mining and refining as well as coal exploitation and power generation.

Karo signed the controversial multi-billion-dollar investment deal with government in April. In addition, Tharisa has since acquired three vast special grants to mine chrome and other natural resources along the mineral-rich Great Dyke, effectively giving the family control of vast swathes of some of the most lucrative mineral concessions in Zimbabwe.

The Great Dyke hosts huge ore deposits, including gold, silver, chrome, platinum, nickel and asbestos.

The involvement of the listed Tharisa in the unlisted Karo Holdings allows the Pourolis family to raise funds on the stock exchange to finance its projects in Zimbabwe. The company acquired the stake at a low cost of US$4,5 million from the Leto Settlement, "a related party being an indirect material shareholder in Tharisa" and "has a right to increase its project ownership by way of further project level investments at discounted values through a farm-in option at various economic milestones".

Karo Holdings is seeking to mine platinum through Karo Platinum on land acquired from Zimplats, as well as refining platinum through a company called Karo Refining. Karo Platinum is an indirect 50%-held subsidiary of Karo Holdings with the remaining 50% to be held by an investment company wholly owned by the government. It will also exploit coal through Karo Coal and generate power through a company called Karo Power.

"In terms of the special grant, Karo Platinum will be entitled to mine PGMs (platinum group metals) situated within the License Area. Karo Platinum will be responsible for the mine development and mining operations which will deliver run-of-mine ore to Karo Refining (Pvt) Limited, (‘Karo Refining'). Karo Refining, 75% owned by Karo Holdings, will build, own and operate the concentrators, smelters, as well as the base metal and PGM refinery," the company announced this year.

"It is intended that the Project Companies will apply for National Project Status and for the projects to be contained within a Special Economic Zone, which will provide the projects with enhanced economics through concessions granted by the Zimbabwe government."

Sources privy to the murky deal say the platinum claims which Zimplats was forced to cede to Karo Resources were yet to be explored, casting doubt on whether Karo had capacity to mobilise the investment capital required.
"It will be difficult for Karo to raise money to establish the plant without first undertaking exploration which is equally expensive. Holding onto these unexplored claims for speculative purposes might be the motive, but it will be difficult," a source told the Independent.