Impala reaches Zimplats deal (June 12, 2006)

South African platinum producer Impala Platinum Holdings (IMPUY-O, IPLA-L, IMP-J) has signed an agreement with the Zimbabwean government trading some mining properties for cash and an “empowerment credit” for its 87%-owned subsidiary, Zimplats Holdings (ZMPLF-O, ZIM-A).

Under the deal, Zimplats gives up properties carrying a resource base of 51 million oz. platinum plus 48 million oz. palladium, rhodium and gold; that is about 36% of its platinum resources. None of the properties Zimplats is releasing figure in current 50-year mine expansion plans.

The government has agreed to buy the properties for US$51 million in cash — though it is debatable, given Zimbabwe’s difficulty meeting International Monetary Fund calls, whether the treasury could come up with that much money — and to credit Zimplats with US$102 million in empowerment ownership, or about 20% of the company’s capitalization.

Zimplats and Impala had been in negotiations with the government since a March announcement that the government would seek a 51% equity ownership in mining operations, with about half of that bought and half requisitioned. In response, Impala threatened that it would cancel planned expansions of the Zimplats operations: the Selous metallurgical plant southwest of Harare, two operating mines, Ngezi and Hartley, and the Mimosa joint venture with Aquarius Platinum (AQPTY-O, AQP-A, AQP-L, AQP-J).

During the dispute, Zimbabwean police raided the Zimplats offices in Harare late in May.

With the agreement signed, Impala has approved an expansion plan with a budget of US$258 million. Annual production would be increased to 160,000 oz. platinum and 162,000 oz. gold, palladium and rhodium, from the present total of 90,000 and 185,000 oz.

South African online news service News 24 reported that Zimbabwean President Robert Mugabe told a group of Zimplats mine managers during a tour of the Ngezi operation on June 1, that the government would “take into account all that you have done” in the deal, and — revealingly — that “any indigenisation program that is acceptable to us” would satisfy the law.

Impala has recently completed a less coercive transfer of ownership in its South African operations, under a Black Economic Empowerment transaction with Royal Bafokeng Resources Holdings, the resource-industry arm of the Royal Bafokeng Nation Development Trust. The deal, which closed in May, was negotiated in December 2005 and initially brings Royal Bafokeng Resources in for a 9% equity stake in Impala, which ultimately grows to 12.3% (T.N.M., Dec. 23-29/05).

Other transactions and an employee share ownership program will bring ownership by “historically disadvantaged South Africans” to 26.5%, which puts Impala over the prescribed 26% quota mining companies must meet by 2014.