HomeLettersUS$750m Essar deal frozen

US$750m Essar deal frozen

The pact, which was reached in March last year, resulted in the Indian firm acquiring 60% of Ziscosteel and setting up a new company, NewZim Steel Ltd, to take over its operations. Essar also acquired 80% of iron ore mining unit Buchwa Iron Mining Company (Bimco) and formed NewZim Minerals Ltd. Bimco held the rights to iron ore claims for feedstock into the Ziscosteel operations.

Essar has however not started operations at Ziscosteel, and has in recent weeks threatened to pull out of the deal in protest over government’s failure to guarantee adequate iron ore supply, which is a critical raw material in the production of steel.

The Indian firm wants to exploit iron ore claims at Mwenezi Ranch in Chivhu but the Mines ministry has blocked the move, arguing it needs time to verify the claims and establish the value of the mineral deposits in the area.

In the wake of the pullout threat President Robert Mugabe and Prime Minister Morgan Tsvangirai have given a directive to Mines Minister Obert Mpofu and his Industry counterpart Welshman Ncube to speedily find a solution to problems dogging the deal. A committee has been formed and tasked with finding solutions.

It comprises officials from the two ministries and was supposed to be ready with its recommendations by Friday last week to pave way for a meeting between Mpofu and Ncube to iron out the sticking points.

Ncube however said officials from the two ministries were still to meet because the Ministry of Mines requested more time to sort out some things on their own.
“We had agreed on the (April) 13th deadline. The agreement was that officials from the Ministry of Mines would work on what needs to be done and then meet officials in my ministry, before we meet as ministers. We are still waiting for the Ministry of Mines, but they have requested for more time,” said Ncube.

Ncube said the delay was frustrating Essar, which was ready to work. Mines secretary Prince Mupazviriho said his ministry had not completed its evaluation exercise, hence the delay.

“We are still in the process of evaluating. We want to determine all the terms of the deal as well as the level of deposits. It may take up to the end of the month,” he said.
The Mines ministry has agreed to transfer Buchwa and Ripple Creek iron ore claims, which have 15 million tonnes and 3O million tonnes of iron ore deposits, to Essar but the Indian firm believes they are inadequate.

The deposit at Buchwa is said to be so deep that it cannot be exploited unless new technology is introduced. By the time Ziscosteel stopped operating, Bimco had already stopped operations at Buchwa.

Essar believes deposits at Ripple Creek will be exhausted in five years, by which time the company would not have recouped their investment. Essar wants iron ore claims at Mwenezi Ranch, which former Ziscosteel employee Roderick Mumbire claims to own through a company called Bearable Prospects (Pvt) Ltd. The government has challenged Mumbire’s claims in court.

Essar has pledged to restore Ziscosteel to its production capacity of 1,2 million tonnes of steel a year within 18 months of operations. Ziscosteel has over the years been one of the most critical industries in the country and its demise hasdirectly contributed to the collapse of several companies in Bulawayo.

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