Zimbabwe Deciding How to Structure Mine Funding Bond

Zimbabwe’s government is seeking advisers as it considers how to structure the southern African country’s first international bond to fund mining development, said Mines Minister Walter Chidakwa.

Chidakwa said he will meet with Finance Minister Patrick Chinamasa to discuss the plan before the release of the budget, scheduled for next month.

“We haven’t worked out how much we are going to raise and who is actually going to work in putting together the bond,” Chidakwa said in an Oct. 26 interview at Mimosa platinum mine near Zvishavane, 299 kilometers (186 miles) southwest of the capital, Harare. He declined further comment on the notes.

President Robert Mugabe’s administration was considering a debt sale to create a fund to finance mining, Chidakwa told an industrial conference in Bulawayo, the country’s second-biggest city, on Oct. 10. The government of Zimbabwe, which has the world’s second-biggest platinum and chrome reserves, is compelling mining companies to sell or cede 51 percent of their local assets to black citizens of the country or the state.

“I would stay away,” Michael Grobler, a fixed-income portfolio manager at Atlantic Asset Management, which oversees the equivalent of about $430 million, said by phone from Cape Town. “There would be less risky opportunities in other African countries. Maybe there would be a place for it in some high-yield portfolios. It also depends on how they structure it, what the covenants are. If they go for asset-backed debt, that may make it more attractive.”

Violent Seizures

Zimbabwe emerged from almost a decade of recession when the government in 2009 abolished the local currency and permitted the use of the U.S. dollar and other currencies including the South African rand, after devaluation of the Zimbabwe dollar drove inflation to what the International Monetary Fund estimated was 500 billion percent. Agriculture was decimated after the violent seizure of white-owned commercial farms began in 2000. The economy will probably expand 3.2 percent this year, according to the IMF.

Companies including Rio Tinto Plc, Mwana Africa Plc and Anglo American Platinum Ltd. dig minerals and metals ranging from diamonds to gold and platinum in Zimbabwe. Mimosa is an equally owned venture between South Africa’s Impala Platinum Holdings Ltd. and Aquarius Platinum Ltd.

The platinum industry needs as much as $5.3 billion if it is to expand to produce more than 500,000 ounces of the metal and to construct precious and base metal refineries, the Platinum Producers Committee said in a report this month. Production is forecast at 365,000 ounces this year, according to the group, which represents Impala, Anglo American Platinum and Aquarius.

Mugabe, 89, won elections in July to extend his 33-year rule. Prior to the elections he made threats to seize control of mines and banks from foreign and white investors and give them to black citizens and the government.

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