Zimbabwe: $5 Billion Deal with China over Platinum Resources

July 3, 2009

Platinum Mining in Zimbabwe

A Zimbabwe government official appealed to Chinese firms today to invest in Zimbabwean mines, asking Chinese companies to ignore the country’s recent troubles and strike now while opportunities are still present.

Zimbabwe and China recently entered into a US$5 billion deal involving the mortgaging of the Zimbabwe’s platinum resources, that have an estimated worth of an estimated US$40 billion or more.

Zimbabwe’s Great Dyke contains the second largest platinum resources in the world behind South Africa’s Bushveld Complex, estimated at over 3.05 billion tonnes. Both regions account for 97.5% of the world’s known platinum resources. The Great Dyke is a geological feature running through the heart of Zimbabwe for about 550 kilometres in a roughly north-south direction.

Zimbabwe Platinum Resources

Zimbabwe's Platinum Resources: US$ 40 Billion or more

Finance Minister Tendai Biti has signed a Memorandum of Understanding (MoU) with fully government owned Export-Import Bank of China (China Eximbank), to settle the details US$5 billion loan backed by the countries Platinum resources.

“Zimbabwe and China have reached a US$5 billion platinum-backed deal,” a government source said. “But the problem is that the loan facility benefits China far more than Zimbabwe. This has caused problems in certain circles of government and will definitely become an explosive issue in parliament.”

The deal outlines that Zimbabwe will get US$5 billion from China Eximbank, and in return the Chinese get 50% equity in a US$40 billion platinum concession. As Zimbabwe’s platinum concession is worth about US$40 billion, this means the Chinese will collect US$20 billion out of their 50% equity at the end of the transaction.

This means a US$15 billion profit – from a US$5 billion loan.

China Eximbank is solely owned by the central government, and is a government policy bank under the direct leadership of the State Council. Zimbabwe’s secured support and aid of about US$3 billion since February.

Tsvangirai recently toured Europe, the United States and Scandinavia in search of money, but only brought home pledges of a modest US$500 million.

“In fact, the deal is badly structured because in the end Zimbabwe loses the sort of amount of money (US$15 billion) which can make this economy the most vibrant in Africa outside South Africa,” a senior Ministry of Finance official said.

Zimbabwe’s rich natural resources include over 40 different types of precious minerals which make the country potentially one of the richest in Africa.

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{ 2 comments… read them below or add one }

1 Priorities July 7, 2009 at 02:27

Though it’s true Zimbabwe will lose a vast amount of money, they must have some reason to make the deal. I suspect they feel the money is necessary to bridge the gap between now and when they could sell their platinum. In that sense, it’s not such a bad deal. It keeps them afloat (and rise out of “a ten-year economic crisis” as reported by Newsy.com). Yes, China gains substantially, but China is also far more stable than Zimbabwe and thus has different priorities than a Zimbabwe with an uncertain political and economic future.

2 Francis Chuma August 30, 2009 at 16:56

Seems the Minister of Finance – Tendai Biti – denied this deal vehemently later on, but is instead talking of a loan application of US$ 950 million that it intended to channel towards agriculture, infrastructure and roads.

He says this loan is still awaiting approval by the government of China and their agencies in particular the Export-Import Bank of China: http://www.thezimbabwetimes.com/?p=19291

Transparency in Zim is a different story, so it will be interesting to see how this deal turns out at the end of the day.

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