These ASX explorers are charging ahead in Zimbabwe as Mugabe memories fade
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Mining investment is flooding into Zimbabwe as the new government opens its doors — and a handful of ASX stocks are making the journey.
At least five ASX stocks are focused on the southern Africa nation — and all have made gains in the past 12 months. (See table below.)
Two ASX-listed companies have been busy Zimbabwe in recent months while another has just started drilling.
In April Invictus (ASX:IVZ), an oil and gas company led by Zimbabwean Scott Macmillan, bought 80 per cent of the gas and condensate Cabora Bassa project in northern Zimbabwe (while changing its name from Interpose). It got a government okay in June.
The project was owned by Mobil in the 1990s and lies in an area of Eastern Africa surrounded by major gas discoveries.
Also in April, Latitude Consolidated (ASX:LCD) — which has attracted a scion of the Eckhoff mining clan to its board, Klaus Eckhoff’s daughter Kim — bought the Mbeta lithium project in the south of the country from Zimbabwean national Robert David Hutchings.
It was the company’s first foray into Zimbabwe and introduced by Mr Eckoff and his colleague Mark Gasson, who are sourcing other projects in Africa for Latitude.
Others have been slower to capitalise.
Prospect Resources (ASX:PSC) made a sales deal with Chinese company Sinomine for its Arcadia Lithium mine last year, but tripped up when world markets stumbled in February.
It repriced a $10 million capital raising from 6c to 5c a share, and has not yet recovered.
Director and man-on-the-ground Harry Greaves says the massive political changes in November allowed them to renegotiate the Sinomine deal in their favour, but the full import of that hasn’t yet been recognised by investors.
In February, it also exercised its option to buy the Good Days lithium project in north eastern Zimbabwe.
Mr Greaves, who was waiting for a break in the weather to fly himself south to the project when Stockhead called, says Prospect is the poster-company for Zimbabwean mining as it’s indigenously-compliant and is the furtherest advanced of the new wave of explorer-producers.
Zimplats (ASX:ZIM) is a platinum miner, one of two minerals the new government is still tightly controlling as the country is the world’s third largest platinum producer.
Lithium and vanadium explorer Six Sigma (ASX:SI6) launched its Zimbabwe ambitions in May, taking up an option to buy 80 per cent of a vanadium-titanium and a lithium project.
It’s just started drilling a lithium target last week — which is expected to be completed this month with assay (or lab test) results due in August.
Here’s a table showing the one-year share price movements of the five Zimbabwe-focused stocks:
From crisis to growth
The reason these companies are able to ramp up their operations is because after the former president Robert Mugabe was deposed, the government has made a conscious effort to bring back foreign investment.
Initially Mr Mugabe’s assent to power in 1980 was a benefit for the country, but by the late 1990s he was using government policy to shore up party support.
Involvement in the Second Congo War in 1997, the start of land reforms, and a pension scheme that would cost $ZW4.2 billion were just a few of the policies that led the country towards hyperinflation a decade later.
By 2008, one piece of legislation all but killed non-Chinese foreign investment in the country: the Indigenization and Economic Empowerment Bill which mandated that all businesses be 51 per cent owned by indigenous Zimbabweans.
Mr Mugabe was deposed in a coup in November and a new government, led by President Emmerson Mnangagwa, went to work to stabilise the economy.
One of the earliest beneficiaries was the resources sector.
They changed the indigenisation law so it only covered diamond and platinum miners, and in March mining minister Winston Chitando said he expected $300 million of investment in the sector this year.
It worked as foreign companies like Invictus and Latitude have raced to buy up long-ignored projects in the resource-rich country.
Two months later the Chamber of Mines of Zimbabwe put a 10 per cent growth forecast on the mining industry for 2018 and revenue of $3.7 billion.
Zimbabwe is a buy?
“Mnangagwa is a reformer and he’s quite a pragmatic guy,” says Invictus’s Scott Macmillan.
“There is a genuine intent to restore the country’s status, but backing that up is all of these legislative changes and bilateral treaties… [that guarantee] no resources nationalisation or things of that ilk.”
The mining minister learned his job at Anglo-American and this is the first time he’s entered politics.
“He’s essentially a poacher turned gamekeeper,” Mr Macmillan said.
It’s a long road
Although the government says they’re open for business, the road ahead is bumpy.
There are still laws new government had to nix a law waiting on the books that would have required all foreign companies to list in Zimbabwe.
Zimbabweans head to the poll for a national election on July 30 yet the Zimbabwean Electoral Commission (ZEC) found 50,000 records on the voters’ roll were duplicates, invalid, or incorrect.
Local reporters say the network and intimidation tactics used by Mr Mugabe’s — and now Mr Mnangagwa’s — Zanu-PF party are still very much in operation.
And it is still working on overhauling the resources sector to simplify the regulatory and tax regimes.
Prospect’s Mr Greaves says the monetary issue is one of the biggest issues right now, as there is simply not enough printed currency in the country.
“The rest is just the perception that Zim is a hard place to do business.”