25 February 2013

Zimbabwe: Locals Score in Zimplats Deal

THE price for the Zimbabwe Platinum Mines' 51 percent shareholding offered to indigenous partners is much lower than any private buyer would have paid independently, the National Indigenisation and Economic Empowerment Board has said. Impala Platinum Mines, the majority shareholder in Zimplats, the country's largest platinum company, agreed - although subject to further negotiations - to dispose of its 51 percent stake to black indigenous Zimbabweans for US$818 million.

According to the NIEEB, independent valuations of Zimplats had valued the mining company between US$2,6 billion and US$4 billion, meaning the value for the 51 percent shareholding on full commercial terms would have been between US$1,3 billion and US$2 billion.

JP Morgan valued the company at US$4 billion, placing the cost for 51 percent at about US$2 billion while Citi Bank of the US valued the firm at US$3,2 billion. Brainworks Capital, the advisor to the Zimplats transaction, and Impala Platinum valued the company at US$2,7 billion and US$2,6 billion respectively.

Assuming the cost for the 51 percent shareholding of Zimplats to the indigenous partners remains at US$818 million, the deal could create immediate value for Zimbabweans of between US$482 million to as much as US$1,1 billion. The value created also excludes future growth plans of Zimplats.

The Zimplats expansion programme is currently underway and will cost as much as US$460 million. After the completion of the expansion in 2014, further expansion including an underground mine valued at US$1 billion will be undertaken.

Zimplats and local partners signed a non-binding agreement last month which provides for general principles on the Zimplats indigenisation implementation plan. Zimplats agreed to sell 31 percent to National Indigenisation and Economic Empowerment Fund, 10 percent to workers and another 10 percent to communities.

Zimplats will provide a loan to purchase the shares which indigenous partners will repay over a 10-year period though foregoing dividends assuming they are declared.

The total value of the deal reached US$971 million after the Government's debt of US$153 million to Zimplats for the land it reposed in 2006 was factored in.

The company has also donated US$10 million to the surrounding communities as seed capital for developmental and income-generating projects.

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