VZCZCXRO6532
PP RUEHDU RUEHJO RUEHMR
DE RUEHSB #0696/01 1640749
ZNR UUUUU ZZH
P 130749Z JUN 06
FM AMEMBASSY HARARE
TO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY PRIORITY
RUEHJO/AMCONSUL JOHANNESBURG PRIORITY 0474
RUEHC/SECSTATE WASHDC PRIORITY 0193
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHUJA/AMEMBASSY ABUJA 1231
RUEHAR/AMEMBASSY ACCRA 1067
RUEHDS/AMEMBASSY ADDIS ABABA 1237
RUEHBY/AMEMBASSY CANBERRA 0495
RUEHDK/AMEMBASSY DAKAR 0861
RUEHKM/AMEMBASSY KAMPALA 1288
RUEHNR/AMEMBASSY NAIROBI 3660
RUEHFR/AMEMBASSY PARIS 1060
RUEHRO/AMEMBASSY ROME 1699
RUEHBS/USEU BRUSSELS
RUEHGV/USMISSION GENEVA 0572
RHEHNSC/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 1446
RUEKJCS/JOINT STAFF WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEKDIA/DIA WASHDC//DHO-7//
RUCPDOC/DEPT OF COMMERCE WASHDC
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK//DOOC/ECMO/CC/DAO/DOB/DOI//
RUEPGBA/CDR USEUCOM INTEL VAIHINGEN GE//ECJ23-CH/ECJ5M//

UNCLAS SECTION 01 OF 03 HARARE 000696 
 
SIPDIS 
 
SIPDIS 
 
AF/S FOR B. NEULING 
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE 
STATE PASS TO USAID FOR M. COPSON AND E.LOKEN 
TREASURY FOR J. RALYEA AND B. CUSHMAN 
COMMERCE FOR BECKY ERKUL 
 
E.O. 12958: N/A 
TAGS: ASEC ECON EFIN EMIN PGOV ZI
SUBJECT: GOZ DIVIDING, CONQUERING PLATINUM INDUSTRY 
 
REF: HARARE 0629 
 
HARARE 00000696  001.2 OF 003 
 
 
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Summary 
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¶1. (SBU) Post's econoff and Johannesburg FSN resource 
specialist held meetings in Johannesburg on May 30 and June 2 
with South African-based officials of the three platinum 
mining companies active in Zimbabwe.  The meetings revealed 
that the sector is divided in how to respond to the GOZ's 
aggressive moves to seize control over the country's mineral 
resources.  Zimplats, majority-owned by South African 
Implats, announced its "empowerment" agreement with the GOZ 
and expansion project (reftel) on June 1.  By contrast, 
Aquarius, in a partnership with Implats, said it had refused 
to negotiate any release of shares to the GOZ.  Anglo 
Platinum, with about 10 percent of Zimbabwe's platinum 
resources, indicated it hoped to convince the GOZ to accept 
assets in Zimbabwe controlled by its parent, Anglo-American, 
in exchange for an empowerment credit.  End Summary. 
 
------------------------------ 
Risk Remains in Zimplats Deal 
------------------------------ 
 
¶2. (SBU) Zimplats, 87 percent-owned by South African mining 
giant Implats, announced its empowerment agreement with the 
GOZ and expansion project (reftel) on June 1, coinciding with 
President Mugabe's dedication of a new portal at the Ngezi 
mine.  Implats Finance Director David Brown reiterated to 
econoff on June 2 the company's assessment that the risk of 
doing nothing had outweighed the risk of relinquishing ground 
to the GOZ.  Zimplats' greatest strength had been its 
Achilles heel ) owning too many assets in the face of the 
GOZ's indigenization priority.  Moreover, Brown noted that 
the development of the 36 percent of ground it had given up 
to the GOZ would be no "slam dunk" for Norilsk or any other 
mining company (reftel), as the ground was "difficult, 
relatively deep and unexplored." 
 
¶3. (SBU) Brown said investors recognized that Zimplats had 
secured value today for resources that the company could not 
have developed for another 100 years or more.  President 
Mugabe's conciliatory remarks (prepared by Zimplats, 
according to Brown, and delivered mostly as drafted) and his 
praise for Zimplats' high level of social investment had also 
allayed investor fears, at least in the short term. 
 
¶4. (SBU) According to Brown, Zimplats and the GOZ had also 
reached agreement on the methodology for calculating the 
empowerment credit: it would be either 19.5 percent or 29.2 
percent, depending on whether the GOZ paid cash for some 
ground or offered equity back to Zimplats.  Zimplats' 
greatest risk now lay in the GOZ's adherence to the 
agreement.  Brown hoped that the deal would "soften the 
edges" of the amendment to the Mines and Minerals Act now in 
draft, but he also feared that the GOZ was emboldened by the 
success of movements in South America to nationalize mineral 
assets. 
 
¶5. (SBU) In that regard, Brown confirmed press reports that 
 
HARARE 00000696  002.2 OF 003 
 
 
on the day of the Zimplats dedication GOZ officials had 
raided Zimplats' Harare headquarters and removed CEO 
Sebborn's computer.  Brown said that Reserve Bank of Zimbabwe 
Governor Gono had instigated the raid based on suspicion of 
illegal foreign account holdings, which Zimplats denied. 
Brown believed Gono was miffed that Mining Minister Midzi, 
and not Gono, would get "all the glory" for the Zimplats 
deal, and that Gono had lost out, for now at least, in the 
grab for a piece of Zimplats.  Brown added that the police 
had already returned the computer and had not exercised a 
warrant to search Sebborn's home. 
 
------------------------------------------- 
Aquarius Platinum Rejects Appeasement Route 
------------------------------------------- 
 
¶6. (SBU) Aquarius Platinum Ltd CEO Stuart Murray heaped scorn 
on Zimplat's "appeasement strategy" in a meeting with econoff 
on May 30.  Australian-owned Aquarius, which jointly owns the 
Mimosa Mine and which Aquarius operates in a 50/50 joint 
venture with Implats, had decided not to negotiate the 
handover of any equity to the GOZ.  Murray maintained that 
the Zimplats deal set a bad precedent for the industry, and 
that any equity relinquished to the GOZ would only end up in 
the hands of a ZANU-PF crony.  Aquarius planned to wait out 
the draft amendment, protest it, suffer expropriation if 
necessary, then work to regain property rights after Mugabe 
left the scene. 
 
¶7. (SBU) Murray said Implats had acquiesced and supported 
Aquarius' hard line approach, as its joint claim - about five 
percent of Zimbabwe's platinum resources - was miniscule in 
relation to Implats' huge stake in the Zimplats claim. 
Murray said Aquarius and Implats had put all further 
expansion of the Mimosa mine, which produced about 70,000 oz 
of platinum per year, on hold pending amendment of Zimbabwe's 
Mines and Minerals Act.  He noted that twenty-six percent of 
the equity in Mimosa still remained available to indigenous 
Zimbabwean investors, but only on fully compensated terms. 
 
------------------------------------ 
Anglo Platinum Looking At Asset Swap 
------------------------------------ 
 
¶8. (SBU) Anglo Platinum, the world,s largest primary 
producer of platinum, maintained it was not economically 
viable for the company to give up ground in Zimbabwe, as 
Zimplats had done, in exchange for an empowerment credit. 
Circumspect with details, Executive Director for Finance and 
Corporate Development Roeland van Kerckhoven indicated to 
econoff on June 2 that Anglo Platinum parent company Anglo 
American might instead offer the GOZ other assets in 
Zimbabwe, including non-mineral assets.  Anglo Platinum was 
"quite certain" it would reach agreement with the GOZ.  (N.B. 
Anglo Platinum holds about ten percent of Zimbabwe's platinum 
resources, but the start of production at its Unki Platinum 
Project is still 2-3 years away.) 
 
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Comment 
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HARARE 00000696  003.2 OF 003 
 
 
¶9. (SBU) However pragmatic the Zimplats deal might appear in 
the short term, its long term benefit is questionable and it 
marks a worrying trend for the sector, which now faces an 
emboldened government.  The GOZ's continued use of the new 
mining bill to pressure foreign mining companies is yet 
another indication of how investor-unfriendly Zimbabwe is and 
how desperate the ruling party is to augment its strained 
patronage system, even at the cost of undercutting the 
economy,s last major source of foreign exchange.  The latest 
developments may preserve some existing mining investment but 
will nonetheless have a chilling effect on new investment. 
 
SCHULTZ