23 January 2013

Zimbabwe: Duration Gold Gives Up to Indigenisation

Gwanda-based Vumbachikwe Gold Mine's foreign shareholder, Duration Gold, has capitulated to government demands and pressure from the local community to cede controlling shareholding to locals.

Sources said there had been extensive talks between Duration Gold and the National Indigenisation and Economic Empowerment Board (NIEEB) after Mines and Mining Development Minister Obert Mpofu and Youth, Indigenisation and Economic Empowerment Minister Saviour Kasukuwere threatened to withdraw the group's mining license for snubbing a community share ownership trust in which other mining firms in Gwanda had participated.

Vumbachikwe last year refused to cede its shareholding to locals under the country's Indigenisation and Economic Empowerment Act which compels foreign controlled companies to sell 51 percent shareholding to locals, arguing that its major shareholders were Zimbabwean.

Vumbachikwe came under pressure to establish its community share ownership trust after chiefs in Gwanda complained that it was reluctant to respond to calls to follow the example of Blanket Mine, which has an operation in the area, and comply.

But last week, NIEEB officials were reportedly in Gwanda, after which an official said Duration Gold had started a process that would see it offloading controlling shareholding to Zimbabweans.

Zweli Lunga, a compliance director with NIEEB, did not give any time frame but said the resources company had already submitted an "acceptable" plan that government was looking at.

"They are softening up," Lunga told The Financial Gazette's Companies & Markets this week.

"We held meetings with them last year and we will be meeting them again. Duration Gold has approached us with their plan. It has not yet been approved but we are looking at it. It looks acceptable," he added.

Vumbachikwe, which is one of Zimbabwe's oldest gold mines, clashed with authorities after its white owners argued that they were Zimbabwean nationals.

Government angrily reacted to this position, with Kasukuwere saying he was "fed up with trying to negotiate with the Vumbachikwe mine management who seem to think they are still operating in Rhodesia".

Zimbabwe was known as Rhodesia before gaining independence from Britain in 1980.

Vumbachikwe Mine was at the centre of a heated discussion in November when Johannesburg Stock Exchange-listed cement producer, PPC, PHL's parent company, concluded its empowerment transaction with communities and workers.

Chief Mathema, who represented the Gwanda community at the signing ceremony held in Harare, hinted that while he was happy with the PPC transaction, Vumbachikwe's failure to comply with the law worried the communities.

"Vumbachikwe Mine is failing to comply with Zimbabwe's laws," Chief Mathema said then.

"We are worried with Vumbachikwe; we don't know what is happening," he said.

Mpofu told the chief that he was ready to flex his muscle if Kasukuwere did not act.

He said after clashing with the mine's authorities in June, he had assumed Kasukuwere had acted.

The indigenisation programme has seen major mining companies such as platinum giant, Mimosa Mining Company, Impala Platinum's Zimbabwean unit, Zimplats Holdings and cement maker Portland Holdings Limited (PHL) coming up with empowerment initiatives under which they have donated shares to local communities as well as workers.

Two weeks ago, Zimplats, the country's largest mining firm, concluded its term sheet with the Zimbabwean government for the sale of 51 percent shareholding to various indigenous entities for US$971 million, although observers said it complied "with a heavy heart".

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