This article relates to due diligence on mining claims in Zimbabwe. The mining industry is growing and of late, gold miners are enjoying rising gold prices. There is growing interest in mining.
I have seen many foreign investors, mainly from China, exploring investment opportunities in Zimbabwe.
This is also due to the improving macroeconomic environment, evidenced by low inflation and currency stability.
Many clients asked to carry out due diligence on mining claims and their owners before business transactions.
I share with you some hints.
Key issues in mining claims due diligence
Existence of the mining claim.
Registered owner.
Size
Mineral
Existence of mineral resources
Actual or risk of forfeiture.
History of the claim
Annual inspection certificate
Any disputes
Any encumbrances
Mining claims held by insolvent companies.
Existence of a mining claim
The starting point is to request the original certificate of registration. It is advisable to seek confirmation from the provincial mining director in the Ministry of Mines and Mining Development as to the existence of the mining claim.
Prospective investors are encouraged to visit the mining claims or the mining location. If they are foreigners, they are encouraged to visit in the company of locals.
Registered owner
It is advisable to establish who the registered owner is. This is established by examining the registration certificate. Some individuals may claim the mining claims are theirs, yet the claims are in the name of mining syndicates or companies.
Request documents of the registered owner for verification. The registered owner may also be verified at the PMD.
Size
The size is shown on the registration certificate. It is advisable to examine the coordinates and physically verify them at the claims.
Mineral
It may appear obvious or too simple, but it is not. I advise investors to examine the registration certificates to ascertain the type of mineral indicated on the registration certificate. I have corrected clients who wanted to sign agreements for certain minerals different from those on the registration certificates.
Existence of resource
This is an area that requires a mining expert. Recently, one of our clients signed an agreement for a certain mining claim only to find out that the indicated resource was not there.
Luckily, the client had taken our advice to pay just a small commitment instead of the large amount required by the claim owner.
History of the claim
Examine the date of first registration and any transfers. You may want to examine or confirm such a movement with the PMD. You may ask a seller to share with you documents relating to the transaction when he/she purchased the mining claim.
Annual inspection certificates
This is very important as failure to comply may result in forfeiture. Request the original annual inspection certificate and check when it was issued and when the next annual inspection is due.
The PMD can also confirm this.
Forfeiture
You may want to check with the PMD if there has been any forfeiture of the mining claim.
You may inspect notice boards at the PMD or make direct inquiries.
Disputes
Disputes are quite common on mining claims. Your legal practitioner may assist in checking this with the PMD or the courts in Zimbabwe.
Encumbrances
Insist on seeing the original registration certificates. You may also check at the PMD.
Mining claims held by insolvent persons
You may check with the Master of the High Court if the holder of the mining claim is an insolvent person and whether the registered owner has the capacity at law to act on the mining claims.
Conclusion
Before acquiring mining claims or entering into business arrangements thereon, it is advisable to carry out thorough diligence thereon.
Disclaimer: This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), ACCA (Business Valuations), MBA (EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, a chartered accountant, insolvency practitioner, commercial arbitrator, registered tax accountant and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He was recently appointed to sit on the Council of Estate Administrators in Zimbabwe. He writes in his personal capacity. He can be contacted on +263 772 246 900 or ghofisi@hofisilaw.com or gohofisi@gmail.com. Visit www//:hofisilaw.com for more articles.-herald
