eBusiness Weekly
Business Writers
Caledonia Mining Corporation, one of the first companies to comply with Zimbabwe’s indigenisation laws is now looking at increasing its shareholding in Blanket Gold Mine to above 49 percent following recent changes to the empowerment laws. In 2007, Zimbabwe passed a law, the Indigenisation and Economic Empowerment Act, that compelled foreign companies to cede 51 percent of their ownership to indigenous Zimbabweans and Caledonia was one of the first to fully comply with effect from September 5, 2012.
However, Zimbabwe has since changed the empowerment laws with the 51 /49 percent ownership structure now applying to platinum and diamond sectors only, prompting the New York Stock Exchange-listed Company to plan an increase of its shareholding in Gwanda-based Blanket Mine.
The gold miner is planning a capital raise, through a rights issue, which it hopes will dilute local shareholding in Blanket Gold Mine where it is currently holding a 49 percent stake after complying with empowerment laws back in 2012.
Caledonia CEO Steve Curtis told the Business Weekly that the group will use the proceeds of the proposed rights issue to expand operations.
“Blanket will use the proceeds of the rights issue to advance work on certain of its satellite properties. Assuming that Blanket’s indigenous shareholders do not subscribe for shares in accordance with their rights, it is expected that, subject to the terms of the rights issue, Caledonia’s shareholding in Blanket will increase from 49 per cent to slightly over 50 per cent,” he said.
He however added that they could retain employee and community shareholding.
In complying with the Indigenisation and Economic Empowerment Act, Caledonia sold 10 percent of the mine’s shares to the Blanket Mine Employee Trust, and another 10 percent was donated to the Gwanda Community Share Ownership Trust.
The Canadian-headquarted group also made a non-refundable donation of $1 million to the Trust after it was set up.
“Caledonia will also evaluate the potential to buy the shareholdings in Blanket that are currently held by certain indigenous shareholders. However, it is our intention to retain the shareholders representing employees and the local community (both of which currently hold 10per cent each) as long term shareholders of Blanket,” said Curtis.
Blanket Gold Mine was one of the first companies to receive its certificate of compliance on indigenisation in 2012, after it signed a conditional agreement to sell a 16 percent stake to the National Indigenisation and Economic Empowerment Fund for $11, 74 million.
This agreement was in addition to the conditional agreements that were signed in accordance with the terms of the February 2012 Memorandum of Understanding.
Caledonia and Blanket however have agreed to implement a rights issue at Blanket to raise approximately $4 million which will be underwritten by Caledonia.
He said any transactions would reflect the value of the indigenous shareholders’ holdings in Blanket after deducting the value of their outstanding facilitation loans and would be subject to a mutually agreed valuation of the holdings in Blanket.
“I wholeheartedly welcome the change in legislation which means that Caledonia can commit new capital so that Blanket can commence exploration and evaluations of additional projects in Zimbabwe.”
He said if this investment is successful it will benefit all stakeholders, including Blanket’s indigenous shareholders, future employees on the new projects, the communities around the new projects and the government of Zimbabwe which would benefit from increased royalty and tax receipts and greater inflows of foreign exchange arising from increased gold production.
If Caledonia successfully reverses its current ownership structures, it will set a precedent for other companies, that unwillingly complied with the laws to seek a reversal as well.
BAT Zimbabwe was the first firm to comply with Zimbabwe’s indigenisation laws while other companies such as PPC Zimbabwe and Schweppes Zimbabwe also complied.
In 2015, former Youth, Indigenization and Economic Empowerment deputy minister, Mathias Tongofa said the government had processed 1,170 indigenisation applications since 2010.
