Portnex operations shut down

…environmental management plan stir

SMELTING operations at Zimbabwe Mining and Smelting Company (Pvt) Ltd (Zimasco) West Plant, which is being leased to Portnex International, were shut down on Thursday last week after Zimbabwe Electricity Supply Authority switched off the company for disregarding an Ema order to shut down.

By Chris Muronzi

Niarchos Investments lawyer Vengai Madzima

Niarchos Investments lawyer Vengai Madzima

According to sources, Portnex failed to submit an environmental management plan to Environmental Management Agency (Ema), businessdigest had established. The company is said to have resumed smelting operations at Zimasco West plant on Wednesday afternoon.

A Portnex executive Neil Wilson refused to comment, referring all questions to his lawyers.

Questions sent to Vengai Madzima, a lawyer for Portnex local entity, Niarchos Investments (Pvt) Ltd had not been responded to at the time of going to press.

Sources close to the developments said Portnex’s operations were shut down on Thursday last week by Ema after the South African company failed to submit an environmental management plan to the regulator.

Ironically, Niarchos is suing Zimasco over environmental pollution and is demanding US$500 million in damages on behalf of a handful of Kwekwe residents.

Ema this week confirmed it had shut down the operation, but Portnex management went on to ignore the order and continued operating. The agency’s spokesperson Steady Kangata told businessdigest that an environmental management plan was a pre-requisite for any mining operation.

“Whether Portnex was told or ordered not to operate without an environmental management plan, the bottom line is that mining is a prescribed activity and they need it,” Kangata said. “Such a plan is not transferrable.”

Ema is said to have asked Zesa to disconnect power to the plant, bringing operations to a halt.

Relations between Ema and Portnex seem to have soured after Portnex through its local entity, Niarchos, joined the regulator to a US$500 million class action suit against Zimasco for allegedly polluting the environment and causing diseases in the city.

Zesa technicians are said to have cut supplies to Portnex this week at the behest of Ema after Portnex executives ignored the Ema order.

Madzima last week accused Zimasco of sabotaging his clients by shorting them of ore feedstock for the smelting plant the company is leasing from the ferrochrome producer as provided for by the agreement, a charge Zimasco dismissed.
A Zimasco spokesperson said Portnex’s accusations were defamatory.

“For Portnex to allege sabotage is defamatory and Zimasco would challenge this company to provide the evidence of the alleged sabotage. Below are the circumstances surrounding the issue of ores for Portnex: Portnex signed a lease agreement with Zimasco for the leasing of furnaces and indicated that they had secured their own sources of ore to run the three furnaces,” the Zimasco spokesperson said.

Madzima added Zimasco had refused to comply with a government directive to give them chrome claims they could mine, saying the company was currently making poor grade ore which was being rejected in the market.

“At the time that the contract was signed, Zimasco had approximately 46 000 hectares of chrome claims in Zimbabwe.

There was enough flexibility for Zimasco to allocate some of these claims to Portnex on tribute. However, at the request of government, in February 2016, Zimasco ceded 23 000 hectares to government, thereby remaining with 23 000 hectares which are just enough for Zimasco’s own long term plans,” Zimasco said.

“Zimasco was never instructed to give any claims to Portnex by Government as alleged. Out of the remaining claims, and in attempting to assist Portnex, Zimasco has identified some claims that can be tributed to Portnex and Portnex has been advised of these claims. Zimasco has even gone further to negotiate removal of small scale miners from the identified claims to enable Portnex to commence mining.”

Zimasco said Portnex was failing to secure feedstock because it does not pay for supplies from tributors.

Relations between the parties seem to have soured after Portnex slapped Zimasco with a US$500 million lawsuit.

Portnex International expressed interest in writing on August 11 2015, but the offer was rejected by the board.

Zimasco is now controlled by Sino Steel Corporation, a wholly-owned Chinese state enterprise.

The Chinese shareholders are said to have supported the local company with over US$100 million since taking it over in 2007 in a US$200 million deal.

Sino Steel, China’s leading steel trader, completed the acquisition of a 100% stake in Zimasco Consolidated Enterprises, which in turn owned a 73% equity in the Zimbabwe operation.

A letter dated August 11 2015 from Portnex general manager Frikkie Laubschere to Reginald Matshiya shows that Portnex was interested in acquiring Zimasco’s assets.

The proposal — a take-over bid for Zimbabwe’s largest integrated ferrochrome producer with an operational smelting capacity of 180 000 metric tonnes of high carbon ferrochrome per annum — was considered and rejected.

“Over the past five years, the company has developed an industry proven value-in model to optimise the raw material feed and subsequent profitability of various ferrochrome furnaces across the world. In addition, the company has developed a substantial database of available ores and reductants, having access to various sources of chrome ores and reductants globally,” the letter reads. “To this end, the company has been investigating the feasibility of operating a ferrochrome production facility in Zimbabwe over the past year. Portnex wishes to express its interest to purchase Zimasco (Pvt)Ltd facilities and assets in order to establish itself as a ferrochrome producer. This will serve to unlock the value from its existing chrome ore and the ferrochrome reductants supply and availability from within the group.”

l See also A4.

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