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Zimbabwe Proposes State Control of Metal Marketing

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May 6 (Bloomberg) -- Zimbabwe is considering auctioning mineral deposits, restricting production of commodities deemed strategic and having the state sell the output from all mines, according to a draft policy document obtained by Bloomberg News.

The proposals are made in a minerals policy prepared by the Ministry of Mines and Minerals, which is yet to be released publicly. The ministry will start discussing the policy with the mining industry tomorrow, Prince Mupazviriho, permanent secretary for mines, said by phone from the capital, Harare, on May 3, declining to comment on the contents of the draft. Zimbabwe has the world’s second-biggest platinum and chrome reserves.

The country needs “an open, transparent and competitive auction procedure for known mineral deposits,” the ministry says in the policy. “The State of Zimbabwe reserves the right to market the people’s mineral assets, but undertakes to recompense the miner at fair and transparent market prices for mineral exports.”

Miners including Impala Platinum Holdings Ltd, and Rio Tinto Group are currently free to market their own minerals. The policy comes after companies including Impala and Anglo American Platinum Ltd. agreed to comply with an existing law to cede 51 percent stakes in their local assets to black Zimbabweans or the government.

Anglo American Platinum spokeswoman Mpumi Sithole declined to comment. Impala Platinum didn’t immediately respond to an e-mailed query. Both companies are based in Johannesburg.

In addition to platinum and chrome Zimbabwe has deposits of coal, gold, copper, diamonds and iron ore.

Restricted Output

If implemented the marketing policy will be a reversal of an earlier liberalization of mineral sales, which formerly had been undertaken by the Minerals Marketing Corp. of Zimbabwe and, in the case of gold, a unit of the central bank. Under the proposal gold and platinum group metals will be sold by a dealer authorized by the Ministry of Finance and all other minerals will be sold by the MMCZ.

“We are engaging with the Ministry of Mines,” said John Chikombero, chief executive officer of the Chamber of Mines, which represents companies, in an interview from Harare. “There are a number of issues in this policy on which we will seek clarification.”

Resource Rent

In addition to the changes to the marketing of minerals the ministry is proposing auctions of deposits as well as imposing new taxes, the policy shows.

A resource rent tax, defined as a tax on profits in excess of an average national return on investment, is proposed to replace the current additional profits tax. An export tax may also be imposed to encourage local processing of minerals, according to the policy.

“The current free mining colonial mineral regime is inappropriate for using national mineral assets to underpin wider development and industrialization,” the ministry said in the policy.

Mining licenses will be awarded for a maximum of 25 years and minerals including iron ore, coal, copper and limestone may be deemed strategic, meaning that their output can be restricted and their prices of the minerals regulated, the ministry said.

Another state company, the Zimbabwe Mining Development Corp., may be tasked with producing some minerals to supply industries and given a three-month period to assess new, state-financed geological data to decide whether to develop mines.

“We have a lot of minerals but there is no major benefit coming to the fiscus through royalties and taxes,” said Witness Chinyama, chief economist at Harare-based Kingdom Financial Holdings Ltd. in an interview. “This policy seeks to take stock of the country’s minerals resources.”

To contact the reporter on this story: Godfrey Marawanyika in Harare at gmarawanyika@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net