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Government of Zimbabwe, Essar Africa Holdings Announce New Steel and Mining Entity

08/04/2011 - Government of Zimbabwe and Essar Africa Holdings Limited announce the launch of NewZim Steel Private Limited and NewZim Minerals Private Limited.

Government of Zimbabwe (GoZ) and Essar Africa Holdings Limited (EAHL) announced the launch of NewZim Steel Private Limited and NewZim Minerals Private Limited. The launch closes the transaction process that started in August 2010 with a public tender for a majority stake of GoZ shareholding in ZISCO.
 
In accordance with the agreement entered into on March 9, 2011, Essar Africa Holdings has committed to an investment of approximately USD 750 million, which will relieve Government of Zimbabwe and ZISCO of all liabilities.  This includes  guaranteed foreign debt, historic liabilities in respect of trade and other creditors, (including unpaid salaries and associated benefits owed to the employees), fixed capital investment for reviving the plant to 1.2MTPA (million tonnes per annum) steel production and working capital requirements of the operations.
 
Subject to the conclusion of discussions with minority shareholders, NewZim Steel (NZS) will be owned 40% by Government of Zimbabwe and 60% by Essar Africa Holdings. This company will acquire the existing assets of ZISCO and expand ZISCO’s steelmaking capacity in two phases:
 
·         Phase 1 — Refurbishment of the plant at an investment of USD 115 million to be completed in 12 to 18 months, delivering an annual production capacity of 0.5 million tonnes.
 
·         Phase 2 — Increase annual production capacity to 1.2 million tonnes, including investment in a 50 MW Greenfield multi-fuel cogeneration power plant and an oxygen plant at an incremental investment of USD 275 million. This phase is scheduled to be completed within three years.
 
In the long term, NewZim Steel has a vision to increase the plant’s annual capacity up to 2.5 million tonnes. Throughout the project’s lifespan, NewZim Steel will continuously evaluate market opportunities to introduce a wider range of products. In addition, the company intends to make every effort to support and encourage indigenous entrepreneurs during the development phases and increase the range of steel products manufactured in Zimbabwe.
 
To ensure sustainable operations, Essar Africa Holdings will invest in the energy sector through investment in Munyati Power Station, and will also invest in the country’s water infrastructure and upgrading of rail infrastructure, which will benefit the operations of NZS and NZM while also serving the communities and businesses in Redcliff and Chivhu areas.  The amount and timing of such investments will be determined after joint feasibility studies.
 
Subject to the conclusion of discussions with minority shareholders, NewZim Minerals (NZM) will be owned 20% by the Government of Zimbabwe and 80% by Essar Africa Holdings. NZM will acquire 100% stake in BIMCO from ZISCO and will be tasked with the exploration and development of ZISCO’s mining assets including the Ripple Creek Iron Ore Mine in Redcliff, its limestone deposits and the Mwanesi Iron Ore Deposit. NewZim Minerals’ priority will be to ensure sufficient supply of good quality iron ore to NewZim Steel for the life of its operations including the increased volumes required by any planned capacity expansions. The iron ore at Ripple Creek will be mined to feed NewZim Steel’s steel plant requirements in the short term. The Mwanesi deposit has been relatively unexplored to date and initial work indicates that it largely comprises of jasphalite ore, which is of average to poor grade, indispersed with hematite ore. Essar Africa Holdings will fund NZM for a full testing program to establish the quantity and quality of the ore, including its beneficiation properties and the latest technologies which can be used for such beneficiation.
 
It is estimated that this exploration, technology assessment and testing program will entail an investment of approximately USD 100 million in the first 18 months. Thereafter, depending on the outcome of the techno-economic feasibility report for the project, Essar Africa Holdings will provide the funding required for construction of a large-scale beneficiation project and related infrastructure, which is estimated to be in the region of USD 3.5 billion. The Government of Zimbabwe’s 20% equity stake in NZM will be financed by Essar Africa. 
 
The beneficiation process will convert raw ore into a product that can be marketed internationally. The value of the beneficiated ore will increase by 500%, resulting in a higher value product from Zimbabwe. Should the beneficiation process prove to be technically and economically feasible it will also require Essar Africa Holdings to invest in a Greenfield 1,000MW thermal power plant to support NewZim Minerals’ needs. The generating capacity of such a power project is higher than the current capacity generated by the country’s largest thermal power station, Hwange Power Station. Beneficiated iron ore in excess of domestic requirements will be commercialized through accessing the export markets. 
 
Ravi Ruia, Vice Chairman, Essar Group, said, “This is a win-win transaction for both Government of Zimbabwe and Essar. We view this union as a long-term partnership with Zimbabwe and its people. We are committed to reviving Zimbabwe’s steel industry, adding value to both its natural and human resources and also improving the infrastructure of the country so as to make a significant contribution to the national economy. I am sure the success of this venture will attract further foreign direct investment in other sectors too.”
 
Ruia added, “We have already committed to two funds of USD5 million each toward a) entrepreneurship and youth development and (b) women empowerment and are working closely  with the Government to implement the initiatives in the best interest of the people of Zimbabwe”.
 
The Essar Group is a multinational conglomerate and a leading player in a variety of sectors including steel, oil & gas, power, bpo & telecom services, shipping, ports, projects and minerals. In the steel business, Essar is a leading global producer on track to operating 14 million tonnes of annual steel capacity. The Group today employs 75,000 people across its operations in more than 25 countries in five continents. Essar Africa Holdings Limited, part of the Essar Group, is a private company incorporated in Mauritius.