Zimplats in a fix, risks default on payments

Business
BY OUR STAFFTHE Zimbabwe Platinum Mine (Zimplats) risks defaulting on loan arrangements after the central bank directed local banks to stop offering banking services to the company for defying an order to bring back money in off-shore accounts. 

Zimplats borrowed from foreign organisations to finance its US$500 million Phase II expansion, currently underway in Ngezi. On Wednesday, the Reserve Bank of Zimbabwe (RBZ) said the white metal producer had defied its directive to bring back the money onshore and instructed banks to stop handling any international or cross-border payments for Zimplats.

This includes stopping issuance of export documentation, electronic or otherwise, on behalf of Zimplats Information obtained yesterday showed that letters have been flying between Zimplats and its bankers after the latter was given a directive by the RBZ.

Executives who spoke to Standardbusiness said Zimplats was now in a fix and risked defaulting on loan agreements with foreign lenders. “The revocation of Zimplats’ right to operate off-shore accounts will have an adverse effect on its subsisting financing arrangements and constitute an event of default under the agreement that it has with foreign financiers. The continued operation of the off-shore accounts is a material condition under the facility agreements,” an executive said.

There were also allegations that, by stopping banks from processing Zimplats’ exports, RBZ had “inadvertently closed Zimplats”. Zimplats said it had an existing agreement with government and RBZ to open, operate and maintain off-shore accounts.

Sources said although the RBZ’s rationale for the directive was motivated by the need to improve the liquidity situation in the country, the situation was different for Zimplats, as it had no surplus funds offshore.

“Zimplats is in the midst of a major expansion project, which is partly funded by offshore loans. Thus, the localisation of Zimplats’ offshore accounts will not result in any improvement in the local market’s liquidity position,” an executive said.

Standardbusiness is also reliably informed that the white metal producer’s insistence on keeping off-shore accounts was necessitated by agreements signed in 1994 and 2005.

The Mining Agreement dated August 24 1994 and the Accounts Management Agreement concluded in October 2005, all gave Zimplats the nod to open, operate and maintain foreign currency accounts outside Zimbabwe.

“The mining agreement is a valid existing government implementation agreement with Zimplats in as far as exchange controls are concerned, and this is clearly provided for in clause 9 of the Mining Agreement, which is in lieu of normal exchange control approvals under the relevant exchange control legislation or regulations as the case may be,” a source said.

“In our view, the mining agreement is valid and Zimplats has a right to operate off-shore accounts.”

 

Zimplats to seek agreement with RBZ

 

In a statement, Zimplats said it would liaise with RBZ to resolve the matter amicably. “Zimplats acknowledges receipt of the RBZ directive. However, we must say we were surprised because in reality, Zimplats had no objection to the initial communication from the RBZ on the policy change.

“Following the change in policy, the company is now paying for 75% of its expenditure in Zimbabwe,” it said. “The remaining 25% related to observing the tenets of its foreign loans that were raised with the knowledge, support and approval of the monetary authorities. Zimplats is urgently liaising with the Monetary Authorities to resolve this matter amicably.”