Tough mines regime on cards
RESOURCES firms with shares listed on foreign stock exchanges will be barred from acquiring mining rights in Zimbabwe, while investors holding mining titles in the country will not be allowed to dispose of stocks to foreigners without government approval once the new Mines and Minerals Amendment Bill has been passed into law.
Gazetted last week, the Bill sets tough conditions for the exportation of raw minerals and proposes up to 20 years imprisonment for investors who violate its provisions.
Once the Minister of Mines has approved the acquisition of shares in a domestic counter by a publicly listed mining company with majority of securities quoted on foreign bourses, 85 percent of funding raised would have to be invested in Zimbabwean mines.
Penalties meted on violators would include fines equivalent to the value of funds raised.
This means if a company raises US$50 million but violates the law, a penalty of US$50 million would be charged against the investor.
The Bill according to a local business weekly Financial Gazette also allows government to deny mining rights or title to a public company unless the majority of its shares are listed on a securities exchange in Zimbabwe.
“Any company that requires a mining right or title which is listed on (a) foreign exchange shall be obliged to notify the minister of such listing, and 85 per centum of funds raised from such listing shall be used solely for the development of mining rights and title in Zimbabwe,” reads part of the Bill.
“The Minister shall be entitled to cancel any mining right or title once it is proven that any person has falsified information. Any person who fails to comply shall be guilty of an offence and liable to a fine equivalent to 100 per centum of cash raised at the foreign listing or imprisonment for a period not exceeding 10 years or both fine and such imprisonment,” it also reads in part.
The Bill also obligates mining rights holders to conduct business with domestic financial institutions.
“Every holder of a mining right or title shall, when conducting financial transactions relating to its mining activities, utilise financial institutions registered to practice as such in Zimbabwe. Any person who contravenes shall be guilty of an offence and liable to a fine not exceeding level 14 or to imprisonment for a period not exceeding 20 years or to both such fine and such imprisonment,” the Bill adds.
It also sets tough conditions on shareholder changes in the mining industry. The Minister of Mines would have to approve such changes in shareholding.
“No shareholder of a company holding a mining title shall sell, dispose of or transfer a Zimbabwe registered security to a non-indigenous person without the written approval of the minister,” it says.
The clause appears to be a response to several deals that have been concluded by foreign firms, but appear to have failed to benefit the country.
There was an outcry in June 2010, when the Toronto Stock Exchange-listed resources group, New Dawn Mining Corporation, took over 89 percent shareholding in Central African Gold (CAG).
The Affirmative Action Group complained that the country’s strategic mineral assets had exchanged hands in foreign lands, and Zimbabwe had benefited nothing.
CAG operated Dalny Mine, Golden Quarry, Venice Mine, Camperdown Mine and Old Nic Mine.
The Bill also sets tough conditions on the exportation of raw minerals.
While it does not forbid the processing of minerals outside Zimbabwe, mining houses would be required to seek government approval before transporting minerals for refinery in other countries.
Zimbabwe’s platinum mining industry ships semi-processed output to South Africa’s Bushveld Complex for final refinery.
It means miners would be required to acquire permits to export the matte.
Restrictions in the exportation of platinum are expected to force sector players to build domestic refineries, create new jobs and stimulate growth in downstream industries.
In 2011, government banned raw chrome exports as part of the same strategy.
While the ban was eventually lifted, chrome miners will face new restrictions once this Bill has been enacted into law.
“No mineral (including industrial scrap) derived from minerals in Zimbabwe shall be exported raw or unprocessed except with written consent of the minister,” says the Bill.
“Any person who intends to beneficiate any mineral mined in Zimbabwe outside Zimbabwe shall only do so upon written authorisation from the minister. The minister shall make regulations prescribing export permit fees payable by exporters for the export of unbeneficiated minerals,” the Bill adds.
Analysts this week said barring financially stable corporations from investing in the mining industry would frustrate efforts to bring back the industry to growth and stability.
The Chamber of Mines of Zimbabwe estimates that the sector requires about US$5 billion in fresh capital.
The Bill makes the country’s mining industry one of the most difficult destinations for foreign capital in the region.
It comes as the Office of the President and Cabinet has made headway in reviewing a myriad of policies and laws impeding foreign direct investment across sectors.
In spite of its efforts to reform the business climate, government now appears to be shooting itself in the foot through the Bill.
The hostility against investment has been blamed for capital flight, which has ruined the economy and turned one of Africa’s most new.-FinGaz