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Zisco deal spurs further investment

Vincent Kahiya

DIVERSIFIED Indian giant Essar Africa Holdings — which scooped a controlling stake in the Zimbabwe Iron and Steel Company (Zisco) — have set their sights on much bigger acquisitions in the country, including a major stake in a listed miner, RioZim Ltd.

Government last year announced that it was selling 60% of its stake in Zisco to Essar for an as-yet undisclosed amount. Government has an 89% stake in Zisco.

Sources close to the agreement said the deal with Essar, which is yet to be signed, was however almost ready to be taken to cabinet for approval before signature.
A government negotiating team on Wednesday held a long meeting with the Essar team in Harare to discuss the signing of the deal. Industry and International Trade minister Welshman Ncube (pictured) yesterday confirmed the meeting and said he expects negotiations to conclude by month-end. The signing, which had been scheduled for this month is now expected next month.

Essar is controlled by Indian brothers Shashi and Ravi Ruia whose fortune is estimated at US$15 billion. The company has international operations in power, gas, mining exploration, communications, shipping ports and logistics, and publishing.

The Essar team in Harare is led by resident director Firdhose Covadia. The firm’s advisors include chartered accountants Delloittes, financial advisors Renaissance Capital and law firm Kantor & Immermann.

The delay in the signing of the agreement has not deterred Essar who are in the process of setting up corporate offices in Harare and buying properties for its senior managers in preparation for an estimated US$1,5 billion investment in mining and infrastructure development.

 

The company’s interest in Zimbabwe extends to iron ore extraction and export, coal mining and beneficiation, infrastructure development and power generation.

Government sources this week said the company had shown “a great interest” in underwriting an ambitious quest by listed miner RioZim to raise US$40 million for the Sega coalfields and thermal power project.

Contacted for comment this week RioZim CEO Josephat Sachikonye confirmed Essar’s interest in the mining firm.

“They (Essar) are not our underwriters,” said Sachikonye. “In fact, they are the ones who are talking to us. There is no agreement yet.”

Asked at what stage the negotiations had reached, he said: “I cannot disclose that. All I can say is that we are still talking.”

RioZim are on the market to raise capital for the development of the Sengwa coalfields in Gokwe North. The project is integral in the construction of a thermal power plant adjacent the coal fields. Mining activity on the Special Grant 849 designated for the power station was stopped in May 2008. Since then efforts have been focused on the power station project.

Energy and Power Development minister Elton Mangoma in an interview this week confirmed Essar’s interest in power development.

“Essar have been coming here for a long time,” said Mangoma. “They are serious investors and are interested in power. That interest has been expressed to us.”

Sources close to the company this week revealed that by the time Essar started bidding for Ziscosteel, it already had a foot in the door as it had already opened talks with government and the private sector. In fact, the company has already started mining exploration for iron ore at Manisi in the Featherstone area. The Manisi claims are owned by Buchwa Iron Mining Company (Bimco). Bimco is a wholly owned subsidiary of Zisco and owns most of the iron ore deposits in Zimbabwe.

“Essar showed interest in the Chivhu iron ore before looking at Zisco itself,” a source said. “There are 33 billion tonnes of ore in that deposit. Bimco’s figures are ‘inferred’ and thus are not really a bankable proposition. In order to take Manisi to the bank as security to borrow money the deposit would need to be measured and the deposit upgraded to ‘proven’. How do you do this? …With a drilling programme.”

The source said the Manisi iron ore has a 43 iron content which is lower than the 52-57% at claims in Redcliff. He however said the company could still make money from exporting iron or which is on high demand at major steel plants throughout the world.

“The other option for Essar is to actually build a new steel plant in Featherstone and process ore from Manisi,” the source said. “That is long term though. At the moment they have to repair Zisco to produce 2,5 million tonnes of  steel.”

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