Canaf ditches its Zimbabwe deal
Posted by CM on December 16, 2007
From MiningMx :
Canadian mining group Canaf Group Inc has abandoned a proposed plan to acquire Great Lakes Minerals and associated mining assets in Zimbabwe, citing the controversial Empowerment and Indigenisation Bill now awaiting assent from President Robert Mugabe.
Canaf president and CEO David Way said political risk in the country, now in its eighth year of a recession, was increasing, making the planned acquisition unattractive. The initial agreement with Midas Trust for the acquisition was adjusted after the announcement of the Indigenisation and Empowerment Bill, passed through parliament in Harare last month.
Way said in a statement. “After much discussion, we have decided that this acquisition is not in the best interests of our shareholders at this time,” he said. “We are committed to providing value to our shareholders and will focus on our now 90%-owned coal processing facility, with a view of increasing both our ownership stake to 100% and the overall profitability of the plant.”
Canaf is the majority holder of Quantum in South Africa, which currently supplies Mittal Steel with approximately 6,000 tonnes of coal per month.
“We will continue to search for new high-potential mining and mining related opportunities in Africa.” Midas Trust and Canaf remained on good terms and may choose to revisit the acquisition potential of Great Lakes Minerals at some time in the future, he said.
Canaf’s decision adds to increasing concern from foreign-owned mining companies over the effect of the proposed law on investment in the mining sector. Rio Tinto Plc recently indicated that it had put on hold plans for $250m of additional investment into expanding Murowa Diamond Mine pending the outcome of agreements with the government that will recognise and reduce the risks to Rio Tinto’s existing and future investments following passage of the proposed law through parliament.
Nothing at all surprising about Canaf’s decision. Long term speculative investments like Lonrho’s in areas like property may be fairly safe and smart in the long term, but high-capital productive investments like mining certainly look very dicey in Zimbabwe at the moment. There are all the uncertainties over policy and many other day to day, on the ground issues that would make a new investor in an area like mining very squeamish.
This is hardly likely to encourage the investors who the government is hoping will partner with locals in mining under the requirements of the Indigenisation Bill.
As with the take over of the farms, in mining Zimbabwe may be about to be reminded that physical possession of a resource is very different from having the capital, technology and managerial wherewithal to be able to exploit it for one’s benefit.