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Why the Stock Market Should Not Write Off Zimbabwe

21 July 2006 - Features - Editor

We may have written it off our stock market portfolio, and may not know exactly where in Africa it is, but the Chinese and Russians continue to court business prospects in Zimbabwe. The country's stock market is miniscule by international standards and the bureaucracy of foreign ownership and terms of listing are both confusing and changing. The GDP is in decline, and you never seem to know how long the country will last. The United Kingdom, which once ruled the land under the name Rhodesia, has led the Western world in a virtual boycott of Zimbabwe. So why bother with this wilderness?

Uranium is the answer. The country has some 20 thousand tons of this mineral stashed away under the earth, and has gold, chrome, coal, tin and a host of other invaluable natural resources as well. That is why the local stock market operates a mining index apart from the usual industrial benchmark. Few other countries have such a large basket of large and known reserves of incredible mineral wealth.

The uranium potential is especially important because the international fuel crisis has rekindled interest in nuclear energy. Uranium prices have doubled during the first half of 2006, and are set to rise even further if India secures rights to enter the market as a buyer. Mining companies in South Africa and some of Zimbabwe's other neighbors have joined the Chinese and the Russians is currying favor with Zimbabwe's despotic establishment, in bids to get mining rights.

U.S. and Canadian mining companies are not on the Zimbabwe scene as of June 2006, but the copper, nickel and other deposits should not keep us away for ever. The difficult political environment cannot last forever, and the abundant natural wealth requires modern technology and international standards for sustainable extraction.

Keep Zimbabwe in view if you have investments in nuclear energy and mineral resources, for the world's balance of supply and demand is likely to feel the impact of this country’s mines. Question North American companies on their estimates and plans to enter this emerging market, and encourage efforts in this direction with your judicious investments.

 


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