eBusiness Weekly
Business Writer
Resource exploitation giant, Kuvimba Mining House (KMH), has reportedly proposed to invest up to US$1,3 billion over three years to breathe a new lease of life into mothballed State-owned Zimbabwe Iron and Steel Company (Zisco).
Zisco was once a vibrant steel giant that ceased operations nearly a decade and half ago.
The investor, which has an expansive array of mining assets, is targeting annual steel output of one million tonnes.
Last Tuesday, the Cabinet approved the partnership between Zisco and Kuvimba, one of the country’s largest mining outfits with interests in gold, platinum, chrome and nickel-for the resuscitation of the mothballed firm’s iron mining and steel processing operations.
Kuvimba is 65 percent owned by various State vehicles while the remainder is owned by management. The mining giant, which has less than two years since being established, won the tender to revive Zisco; once Africa’s largest integrated steel works, ahead of other six bidders.
Zisco stopped operations in 2008 partly due to mismanagement and the negative impact of huge debts.
Industry and Commerce Minister Dr Sekai Nzenza declined to comment on the specifics of the proposed investment saying this would only be revealed after parties have signed the agreements.
“The approval by the Cabinet will now allow the parties to negotiate and sign binding agreements and this will be done very soon,” Dr Nzenza said in an interview.
“But what I can say is after wide consultations with various stakeholders including ZIDA (Zimbabwe Investment Development Agency), some government ministries, SERA (State Enterprises Restructuring Agency) among other stakeholders, I am quite confident that they will deliver,” Dr Nzenza said.
“It took time to be convinced but I think that was necessary.”
Sources said Kuvimba pledged to invest US$1,3 billion into reviving Zisco over three years from the date of signing the contract, mainly focussing on the firm’s mining operations and building of a new plant.
Kuvimba would start by raising US$300 million through debt and quasi-equity facilities. This investment would be recouped through sale of iron ore over three years.
Further, the investor would mobilise US$1 billion organically from internal value creation activities on its mining operations, which will also be invested into the steel plant, to grow its capacity to the target of one million tonnes per year.
It is projected Zisco would generate US$270 million from mining operations annually, to be re-invested in the steel works and unlock capacity to borrow more.
This would be achieved through a five-point plan to be executed over the 3-year period, entailing restructuring of Zisco’s corporate operating model, crafting a new commercially viable turnaround strategy, recapitalising Zisco’s finances and arranging the capital injection to kick start operations.
In addition, the plan would establish clear strategic and operational milestones to attract global strategic partners and prepare exit options for investors at the end of the three-year restructuring programme.
Kuvimba’s proposal is anchored on a co-management contract agreement with Zisco, with Kuvimba retaining full control of mining operations.
Kuvimba will be entitled to an 8 percent management fee from the gross revenue of the operations.
The mining contract would be for three years, after which Zisco may choose to extend the contract or assume full responsibility of the mining operations. It means no shares have changed hands and the deal is entirely anchored on a management contract.
