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Mugabe's Re-Election May Signal Mining Troubles

Aug 13, 2013 3:51 PM   By Sandra Mardenfeld
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RAPAPORT... The re-election of Zimbabwe's President Robert Mugabe may cause problems for the mining industry, according to a report by Business Monitor International (BMI), which warns that foreign investors may sour on the country due to the "possibility of indigenization without compensation as well as greater political interference in the sector." As a consequence, some companies could seek more stable business environments in other countries.

Already Zimbabwe's indigenization program forces foreign companies to give 51 percent of their assets to local investors. With the ZANU-PF victory, a greater portion might be in store for the country's mineral sector and BMI's mining index reflects that possibility, with its value declining by 13.4 percent nine days after the election.

According to BMI, Zimbabwe already placed in the bottom four  African countries in its Mining Risk/Reward Ratings, with a score of 37.4 points. Since platinum and gold remain Zimbabwe's main mining sectors, this decline comes at an already bad time as those products face weak global prices.

Botswana, Zambia, South Africa, Mozambique and seven other countries come ahead of Zimbabwe in the rating -- with only Mali, Tanzania and Côte d'Ivoire falling below.

BMI forecasts that gold production in Zimbabwe will grow 7 percent year on year between 2013 and 2017, and platinum production will increase 9.3 percent over the same period. BMI acknowledged that their predictions were based on government rhetoric.

Additional reporting by AcquireMedia
Tags: aluminum, BMI, diamonds, gold, mugabe, platinum, Sandra Mardenfeld, Zimbabwe
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