JOHANNESBURG (miningweekly.com) – Zimbabwe’s controversial Indigenisation and Economic Empowerment Act is likely to discourage foreign investment in the country’s mining sector, Cadiz analyst Peter Major said on Monday.

New rules of the Act gazetted on Monday expanded the law to require all foreign mining companies valued at more than one dollar to sell 51% stakes to locals, after previously only targeting companies valued at more than $500 000, sending platinum shares plummeting on the JSE.

The world’s fourth-largest platinum-miner Aquarius Platinum was hit the hardest, with its shares dropping by as much as 8,54% on Monday, to close at R37,43 a share. The company shed 6,87% on the ASX and dropped by 7,86% on the LSE.

Impala Platinum’s (Implats) shares dropped by 5,5% trading at R186,60 a share at its lowest point, but recovered to R197,58 a share when the market closed at 17:00 in Johannesburg.

Shares in Anglo American Platinum dropped marginally by 2,6%, to R661,60 but closed at R679,37 a share.

Major said companies would be reluctant to put more money into Zimbabwe mining, as controversial statements from government and the implementation of indigenisation legislation devalued the country’s assets.

He added that President Robert Mugabe was taking political risks for election purposes.

“Mugabe tells his people what they want to hear, as he wants to win the election by a landslide. However, it does not do his country any good, as it merely promotes mining shallow assets and illegal mining, while demoting further foreign investment,” he noted.

Aquarius confirmed that its Zimbabwean operating subsidiary, Mimosa Mining Company, was engaged in discussions with the relevant authorities to establish a position that would be compliant with the Act and beneficial to stakeholders.

The company quoted a notice published by the Youth, Indigenisation and Economic Empowerment Minister on Friday that all foreign-owned mining businesses had 45 days to set out the manner in which they planned to achieve the indigenisation quote. Such a plan, once approved by the Minister, had to be implemented within six months of the date of the notice.

Aquarius holds a 50% interest in the Mimosa mine in a joint venture with Implats. Mimosa produced 199 625 oz in 2010, of which 99 812 oz were attributable to Aquarius. It contributed 24% to group production.

An Implats spokesperson told Mining Weekly Online that the company would release comment through its ASX-listed subsidiary Zimplats, which operates three underground mines and a concentrator at Ngezi in Zimbabwe, in due course.

Further information would be made available when discussions have been finalised.