Caledonia Mining Corp. has reached an agreement to turn over a 51-per-cent interest its Blanket gold mine in Zimbabwe to native Zimbabweans in a $30-million (U.S.) deal.
The agreement announced Monday brings Caledonia in line with Zimbabwe's foreign ownership rules that came into effect in 2010 and was hammered out in negotiations with the Ministry of Youth, Development, Indigenization and Empowerment.
Under the law, companies worth more than $500,000 that are run by non-black Zimbabweans were given five years to sell a 51-per-cent stake to Zimbabweans.
Terms of the agreement with Caledonia call for 16 per cent of the mine to be sold to the National Indigenization and Economic Empowerment Fund; 15 per cent to identified Zimbabweans and 10 per cent to a management and employee trust for the benefit of current and future managers and employees.
As well, 10 per cent is to be donated to the Blanket Gwanda community trust and Caledonia is also to make a non-refundable donation of $1-million to the trust as soon as it has been established. Caledonia will facilitate funding of the sale by taking payment in future dividends from Blanket.
Blanket's unaudited revenues and profit after tax for the year to Dec. 31 were $56.6-million and $19.2-million respectively.
Caledonia president and CEO Stefan Hayden said the agreement, when fully implemented, will "represent the conclusion of the indigenization requirements for Blanket."
"The transaction will be concluded for a value which is close to Caledonia's current market capitalization," Mr. Hayden said. "This is a significant achievement in the current environment and the transaction is neither an expropriation nor a partial nationalization."
During a low point in the discussions last year, the indigenization minister called for the company's mining licence to be revoked.
Mr. Hayden said "excellent progress" has been made at the Blanket mine in recent years with gold production increasing more than 300 per cent from 3,148 ounces in the first quarter of 2010 to 10,533 ounces in the fourth quarter of 2011. Meanwhile, cash operating costs have fallen from $804 per ounce in the first quarter of 2010 to $583 in the third quarter of 2011.
"The indigenization agreement, when fully implemented, will introduce new shareholders to Blanket and I am confident that their participation will enhance Blanket's further growth and development," Mr. Hayden said.
Besides the Blanket mine, Caledonia operates two platinum-nickel exploration projects in South Africa and a cobalt-coal exploration project in Zimbabwe.