[miningmx.com] — SHARES in JSE-listed platinum producers with significant exposure to Zimbabwe took a beating on Thursday, following reports that the government has agreed on policy to take 51% ownership of all mining-related activities.
State-owned The Herald newspaper reported that Zimbabwe’s cabinet also resolved that communities would own 10% of gross profit from mining activities in their areas.
“All new projects in the mining sector are expected to comply with the above requirements of the law,’ Youth Development, Indigenisation and Empowerment Minister Saviour Kasukuwere was quote as saying.
“Recognising that our communities have not been benefiting from the exploitation of natural resources which they host, Cabinet has resolved that through a community share ownership scheme already provided for in the law, communities shall be entitled to 10% of gross profit – that is 10% of profit before tax.’
While the platinum price remained flat (up 0.27% to $1690/oz), the JSE’s biggest players in Zimbabwe – Impala Platinum, Aquarius Platinum and Anglo Platinum – were down 1.78%, 4.48% and 2.69% respectively shortly before close of trade.
Those counters with no Zimbabwean operations largely followed the platinum price, with Northam Platinum (down 0.3%) and Lonmin (down 0.4%) trading virtually unchanged.
The significant fall in Aquarius could be attributed to its Zimbabwean exposure. It holds a 50% stake in Mimosa mine which contributed 22% to the group’s total output during its most recent reporting period.
While Impala’s Zimplats operations only contributed around 10% to the group’s most recent output figures, the project holds centre stage in the group’s growth strategy.
RBC Capital Markets mining analyst Leon Esterhuizen said share prices would for now ignore the potential downside to the announcement.
“This is to be expected (in the run-up to an election, due in 2011) and would probably get worse before it gets better,’ he said.
“I think for now the market would ignore most of the potential downside. If you’re talking to the people on the ground (in Zimbabwe) you’ll get a different view of what is happening. They’ll argue there will eventually be some pragmatic solution as government knows such a policy would drive investment away.’
Imara SP Reid analyst Steve Meintjes concurred, saying the market wouldn’t become panicky just yet. “At the same time, it is not something you could just scoff aside,’ he said.
Aquarius, Impala and AnlgoPlat are yet to make an official announcement on the issue.
Zimbabwe’s emergence as an important platinum metals group player was underscored in Johnson Matthey’s interim review of the market released in November, which said production from that country would this year counterbalance supply from other regions.
According to the report, Zimbabwe’s platinum output was expected to grow by 17.3% to 405,000oz this year. Although this figure represented only about 7% of the expected global supply, it was already double the contribution the country made in 2008.
