(MININGWEEKLY, REUTERS) Zimbabwe probing New Dawn, CAG deal – Minister

Monday, June 28, 2010

(MININGWEEKLY, REUTERS) Zimbabwe probing New Dawn, CAG deal – Minister

Zimbabwe probing New Dawn, CAG deal – Minister
By: Reuters
25th June 2010

TEXT SIZE HARARE – Zimbabwe is probing New Dawn Mining Corp's acquisition of Central African Gold (CAG), which a top ally of President Robert Mugabe says is against the country's empowerment law, state media reported on Friday.

Earlier this month, New Dawn, which is listed on the Toronto Stock Exchange, announced it had acquired 89 percent of the AIM-listed CAG in a bid to expand its Zimbabwean gold operations.

But the Minister of State for Presidential Affairs, Didymus Mutasa, is quoted by the state-controlled Herald newspaper as saying the transaction "did not comply with empowerment regulations and threatened Zimbabwe's security and economic interests."

In 2007, Mugabe's ZANU-PF party pushed through an Indigenisation and Economic Empowerment law, which seeks to transfer majority control of all foreign-owned firms -- including mines and banks -- to local blacks.

Mugabe was forced to set up a power-sharing government with bitter rival, Morgan Tsvangirai, now prime minister last year after disputed polls in 2008.

Tsvangirai and his Movement for Democratic Change (MDC) are opposed to the law, which they say undermines efforts to rebuild Zimbabwe's battered economy.

"Government cannot, therefore, continue to countenance these kind of transactions. This one evades any local involvement, particularly as the Western sanctions persist," Mutasa is quoted as saying.

"There is absolutely no monetary value accruing to Zimbabwe from it. It does not bring even one additional cent into its cash-strapped economy."

New Dawn said its acquisition of CAG's assets would increase its annual production capacity to 60 000 oz within the next two years. New Dawn, which resumed operations last year after the government liberalised gold trade, is currently producing just over 1 200 oz/m from its two mines.

CAG's Zimbabwean operations include the Zimbabwe Stock Exchange-listed Falcon Gold, whose five mines are under care with some conducting limited mining operations.

Players in the mining industry have urged the government to consider each economic sector's specific capital requirements when applying the empowerment law.

On Wednesday, Indigenisation and Economic Empowerment Minister Saviour Kasukuwere said the government had revised its rules on foreign firm takeovers to apply varying local shareholding requirements to different sectors of the economy.

Edited by: Reuters

Labels: INDIGENIZATION AND EMPOWERMENT ACT (ZIMBABWE), NEW DAWN MINING CORP