PLATINUM - ZIMBABWE,S BELEAGURED GOLDEN GOOSE

C O N F I D E N T I A L SECTION 01 OF 03 HARARE 000141

SIPDIS

AF/S FOR B.WALCH
AF/EPS FOR ANN BREITER
NSC FOR SENIOR AFRICA DIRECTOR
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN
TREASURY FOR D. PETERS
COMMERCE FOR ROBERT TELCHIN
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS

E.O. 12958: DECL: 04/01/2018
TAGS: EMIN EINV PGOV ZI
SUBJECT: PLATINUM - ZIMBABWE,S BELEAGURED GOLDEN GOOSE

REF: A. HARARE 110

B. HARARE 096

C. 2008 HARARE 459

D. 2007 HARARE 172

Classified By: Ambassador James D. McGee for reason 1.4 (d)

--------------
Summary
--------------


1. (C) Zimbabwe's rich platinum resources contributed a
third of the country's exports, excluding gold, in 2008. The
ore came from two mines. Platinum claims surrendered to the
government in recent years by mining companies in return for
empowerment credit have for the most part ended up in the
hands of asset speculators, apparently including President
Mugabe. Rogue investor Billy Rautenbach, in the meantime,
appears to have run into technical problems, compounded by
USG sanctions, in developing his company's recently acquired
platinum claim. Cleaning up the minerals sector would go a
long way toward stabilizing Zimbabwe,s economy. End Summary.

-------------- --------------
Platinum ) Zimbabwe's Goose that Lays the Golden Egg
-------------- --------------


2. (U) Zimbabwe,s mineral-rich Great Dyke (Ref D) has four
major platinum complexes that constitute the world's second
largest platinum reserves: At its southern tip, near
Zvishavane, is the Wedza Complex, where Impala Platinum
(Implats) and Aquarius Platinum jointly operate the Mimosa
mine; north of the Wedza Complex, near Shurugwi, is the
Selukwe Complex where Anglo American and Central African
Mining & Exploration Company (CAMEC) have claims not yet in
production; further north, about an hour west/southwest of
Harare, is the Hartley Complex dominated by Zimbabwe Platinum
Mines (Zimplats); and at the far northern tip of the Great
Dyke is the undeveloped Musengezi Complex at Snakeshead,
controlled by African Consolidated Resources (ACR)(Ref A).


3. (SBU) Platinum group metals (PGM),predominantly
platinum, made up two thirds of Zimbabwe's mineral exports in
2008 and one third of the country's total exports (excluding
gold in both cases). Alex Mhembere, CEO of Zimbabwe Platinum
Mines Ltd (Zimplats),told econoff on February 9 that
Zimplats exported US$294 million in PGM in 2008 from its
Ngezi mine in the Hartley Complex. The Mimosa mine in the
Wedza Complex is Zimbabwe's second of two PGM producers. It
exported about US$250 million worth of minerals last year,
according to Fungai Makoni, Mimosa's General Manager for
Finance. The Reserve Bank of Zimbabwe reported in its
January 2009 Monetary Policy Statement (Ref B) that the
minerals sector (excluding gold) contributed 51 percent to
Zimbabwe's total exports of US$1.6 billion in 2008. From
these numbers we derived PGM's contribution to exports.
Zimplats anticipates doubling its 2008 ore production of 2.1
QZimplats anticipates doubling its 2008 ore production of 2.1
million MT by July 2009 once a new concentrator comes on
stream in May 2009, and doubling platinum production by June

2010.

-------------- --------------
Surrendered Claims Change Hands among Speculators
-------------- --------------

HARARE 00000141 002 OF 003




4. (C) Mhembere told us that the parts of the Hartley
Complex that Zimplats had surrendered to the government in
2006 had been split into four sections. RusChrome took over
the Darwendale section at the northern tip of the Hartley
Complex and has sought unsuccessfully to sell it. Of the
other three parts, a Chinese company called Global Platinum
Group was trying to sell the claim it had acquired; a Russian
company had sold part of its claim to a U.K. company called
Amari; a Hong Kong company Cross Global had acquired some
ground, while an unnamed South African company was also in
discussion for the purchase of ground. Mhembere noted that
Global Platinum Group, Amari and Cross Global had no
exploration or mining expertise; he assumed they were asset
speculators.

-------------- --------------
First Lady "Dis Grace" Linked to Hong Kong Claim Holder
-------------- --------------


5. (U) The Sunday Times reported on February 15, 2009 that
Cross Global, in which President Mugabe apparently has an
interest, purchased a house in Hong Kong valued at about US$
5 million for Mugabe in June 2008, and that South African
Hsieh Ping-Sung had bought Cross Global "off the shelf." The
article also stated that Hsieh had made thousands of dollars
of purchases on behalf of First Lady Grace Mugabe in January
2008 and suggested that they were intended for distribution
to her husband's supporters during the first presidential
election campaign in 2008.

-------------- --------------
Anglo American on Course; Rautenbach Operation in Trouble
-------------- --------------


6. (SBU) Anglo American's Unki platinum mine in the Selukwe
Complex plans to initiate about 30 years of PGM production in
mid 2010, according to Colin Chibafa, Corporate Finance
Specialist at Anglo American in Johannesburg, who spoke to
econoff in Harare on February 11. Anglo American surrendered
about 30 percent of its PGM mineral rights in Zimbabwe to the
GOZ in 2008 in return for empowerment credit.


7. (C) CAMEC, which gained control over part of Anglo
American's surrendered ground last year (Ref C),had
announced optimistically in July 2008 that it would start
production in 2009. Zimplats Director Greg Sebborn told us
on February 3, however, that CAMEC's exploration team had run
into "serious geological problems" at the site; early
drilling results had disappointed both in quality and
quantity. In addition, Sebborn said CAMEC had based its
development plans on a high world platinum price that had
since crashed. (Note: The price of platinum fell from over
Qsince crashed. (Note: The price of platinum fell from over
US$2,200/oz in February, 2008 to under US$800/oz at
end-October 2008; it has since inched up to about
US$1,100/oz. End Note.) Further impeding CAMEC's operation,
Sebborn and Chibafa told econoff separately that CAMEC's
claim (which is about one third of Anglo Platinum's
relinquished ground) was now the subject of a double-pegging
dispute with the South African mining entrepreneur Loucas
Pouroulis. (Comment: It is unclear whether Pouroulis had
double pegged CAMEC,s claim or the GOZ had sold the rights
twice. End Comment.)


HARARE 00000141 003 OF 003



8. (C) Chibafa added, with some schadenfreude, that Anglo
American had recently rebuffed a request from CAMEC for water
from Anglo American's nearby Unki mine complex. He also told
us that CAMEC's operation was hamstrung by inadequate power
supply. We had predicted (Ref C) that major CAMEC
shareholder Billy Rautenbach*a Specially Designated
National*would flip the asset quickly. However platinum
executives pointed out to us that the claim was far more
valuable with proven rather than unproven reserves, thus
explaining Rautenbach's investment*at a minimum*in
exploration.


9. (C) Whether Rautenbach can continue to finance
exploration is unclear. In January, a Rautenbach contractor
on a different project told econoff that USG sanctioning of
Rautenbach had dried up some of his companies' lines of
credit and put him under considerable financial stress.
Compounding Rautenbach's problems, Zimbabwe's independent
weekly The Standard reported in its February 15-21, 2008
issue that about 2,000 families had refused to vacate their
smallholdings to make way for an ambitious Rautenbach
bio-diesel project in Masvingo province. Having led the
removal of white farmers from their farms, they didn't want
to give up their land to another white person.

--------------
Comment
--------------


10. (C) Zimbabwe's second largest platinum reserves in the
world have the potential to earn the beleaguered economy huge
foreign exchange returns. Yet the GOZ frightens away serious
investment by threatening reputable players, mineral rights
and breaching contractual agreements. On top of that, in
characteristically short-term thinking, it apparently has
sold the platinum claims wrenched from major international
investors to asset speculators, including Mugabe himself.
Cleaning up the minerals sector would go a long way toward
stabilizing Zimbabwe,s economy.
MCGEE