Caledonia Mining Corp. says it faces a potential legal dispute with the Zimbabwean government over the ownership of the Toronto company's Blanket gold mine in southern Africa.
A new Zimbabwean law that forces foreign and local companies to sell a majority stake in their businesses to black Zimbabweans came into effect last year and required Caledonia to submit a so-called indigenization plan with the government.
Caledonia said Friday it presented such a plan, but the country's minister responsible for the policy has asked the mines minister to revoke Blanket's operating licence “on the grounds that Caledonia's proposal does not meet the legislated indigenization requirements.”
“It is understood that a number of other mining companies, banks and other businesses have been instructed to revise their indigenization proposals or risk the loss of their operating licences,” Caledonia said in a release before stock markets opened Friday.
“Caledonia believes the Minister for Indigenization has exceeded his legal powers both in terms of his assessment of Caledonia's proposal and his request to the Minister of Mines. Caledonia is seeking urgent clarification from the relevant ministers, and is also consulting with its legal advisers regarding appropriate legal action.”
Under the Zimbabwean law, companies worth more than $500,000 (U.S.) run by non-black Zimbabweans have five years to sell a 51 per cent, upon the threat of jail sentences.
Caledonia said Blanket's operations continue as normal while the company tries to deal with the dispute.