HARARE (Reuters) - Zimbabwe's controversial policy of transferring majority control of foreign-owned firms to black Zimbabweans will begin in the key mining sector, a minister said on Tuesday.

Under regulations which took effect on March 1, the companies must submit plans to show how they will sell 51 percent of their shares to black Zimbabweans within five years.

The laws have divided the fragile unity government formed last year by Mugabe and Prime Minister Morgan Tsvangirai, who said they were issued without consulting the cabinet.

"I am happy to announce that government has unanimously decided that implementation of our indigenisation policy starts with the mining sector," Youth, Indigenisation and Empowerment Minister Saviour Kasukuwere said after a cabinet meeting.

The world's two largest platinum miners, Anglo Platinum and Impala Platinum, have multi-million dollar investments in Zimbabwe, while Rio Tinto has gold and diamond interests.

Kasukuwere said the government had taken note of proposals by Zimbabwe's Chamber of Mines for lower thresholds of local ownership.

"Government will now engage the mining sector so as to come up with a consensus position," he told journalists. "Sectoral discussions will decide issues of timeframes (for compliance) as well as thresholds."

COMPENSATION

The government was also aware of investor fears foreign firms would be forced to give up shares without payment.

"Some of the concerns raised relate to the interpretation of the word 'cede' in relation to shareholding, which was misconstrued to suggest compulsory takeover without compensation," Kasukuwere said.

"The indigenisation programme is based on fair transaction where full value is compensated for."

He said hundreds of foreign firms in Zimbabwe had submitted plans to sell majority stakes to local blacks, despite confusion over the law.

The minister, an ally of Mugabe, last month ordered firms to report details of ownership and plans to achieve majority local control. A spokesman for Tsvangirai said last week the regulations had been suspended, a statement quickly denied by both Mugabe and Kasukuwere.

Kasukuwere told the state-controlled Herald newspaper in a report earlier on Tuesday that foreign firms were complying.

"We have so far received more than 400 submissions from various companies and as government we are happy with such an overwhelming response," he said.

Units of British American Tobacco Plc, Unilever and Impala Platinum are among the companies that have submitted plans, the Herald said.

Firms that have not yet submitted plans will get a 30-day extension from the April 15 deadline, Kasukuwere told the paper, adding the government could terminate licences of companies that did not comply.

Mugabe's ZANU-PF government passed an indigenisation and economic empowerment law in 2007, before the formation of the unity government. Analysts have said the policy would discourage foreign investment and hurt efforts to fix a crippled economy.