Redcliff: Government of Zimbabwe (GoZ) and Essar Africa Holdings Limited (EAHL) today announced the launch of two entities: NewZim Steel Private Limited and NewZim Minerals Private Limited. This closes the transaction process that started in August 2010 with a public tender for a majority stake of GoZ shareholding in ZISCO. The launch begins a new chapter in the economic growth of Zimbabwe, for all Zimbabweans and particularly for the communities in and around Redcliff and Chivhu.
From left to right: Zimbabwe PM, Morgan R Tsvangirai; Minister of Industy & Commerce, Prof. Welshman Ncube; President, Robert G Mugabe; Essar Group Vice Chairman, Ravi Ruia; Deputy PM, Prof. Arthur Mutambara, at the inauguration of NewZim Steel and NewZim Minerals
In accordance with the agreement entered into on 9 March 2011, EAHL has committed to an investment of approximately USD 750 million, which will include relieving GoZ and ZISCO of all its 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 GoZ and 60% by EAHL. This company will acquire the existing assets of ZISCO and will revive 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 12-18 months. This will deliver a production capacity of 0.5 MTPA.
- Phase 2: Increase production capacity to 1.2 MTPA, including investment in a Greenfield multi-fuel cogeneration power plant of 50 MW and an oxygen plant at an incremental investment of USD 275 million. This is scheduled to be completed within three years.
In the long term, NZS has a vision to increase the capacity of the plant up to 2.5 MTPA.
Throughout the project’s lifespan, NZS will continuously evaluate market opportunities to introduce a wider range of products. In addition, every effort will be made during the development phases to support and encourage indigenous entrepreneurs and increase the range of steel products manufactured in Zimbabwe.
To ensure sustainable operations of NZS, EAHL will invest in the energy sector through investment in Munyati Power Station as well as investment in the country’s water infrastructure and upgrading of rail infrastructure. The proposed investment in the water sector will be in the areas of new pump stations, water supply pipelines and the possible construction of a new dam. This will not only benefit the operations of NZS and NZM but also serve the communities and businesses in Redcliff and Chivhu areas. The proposed investment in rail infrastructure will increase the capacity and reliability of the rail line between Hwange and Mutare, and will benefit the economy and in particular the mining and agricultural sectors. The amount and timing of such investments will be determined after feasibility studies undertaken jointly with the relevant line ministries/parastatals.
Subject to the conclusion of discussions with minority shareholders, NewZim Minerals (NZM) will be owned 20% by the GoZ and 80% by EAHL. 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. The priority of NZM will be to ensure sufficient supply of good quality iron ore to NZS 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 NZS’ 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. EAHL will fund NZM for a full testing programme 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 programme 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, EAHL will provide the funding required for the construction of a large-scale beneficiation project and related infrastructure which is estimated to be in the region of USD 3.5 billion. The 20% equity stake of GoZ in NZM will be financed by EAHL and will represent an investment in a world class asset that will benefit the people and the economy of Zimbabwe.
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 EAHL to invest in a Greenfield 1,000MW thermal power plant to support the needs of NZM. 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 commercialised through accessing the export markets. The most logical route for the exports of beneficiated ore from Zimbabwe is Mozambique. NZM will undertake detailed feasibility studies to decide between either rail logistics or a slurry pipeline for the most cost effective export logistics solution. Irrespective of which logistics solution is chosen, Zimbabwe will benefit from a significant investment in infrastructure.
“This project coming to fruition is evidence of how serious we are, as a unity Government, about restoring the past glory of Zimbabwe’s steel industry. While this deal is a signal that serious players are investing in Zimbabwe, it can also be a catalyst for attracting further FDI. Key for us is that it seeks to achieve many objectives of the Medium Term Plan, among other things infrastructure development, employment creation and resource utilisation.” said Prof. Welshman Ncube, Minister of Industry and Commerce.
“We are pleased with the selection of Essar as a partner because of its commitment to the project and its track record in establishing Greenfield and Brownfield steel facilities, its experience in infrastructure development and the successful undertaking of large capital intensive projects,” concluded Prof. Ncube.
Mr Ravi Ruia, Vice Chairman, Essar Group, said, “This is a win-win transaction for both GoZ 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.”
Essar is recognized as a responsible corporate citizen across the countries and communities in which it operates, and supports a wide variety of Corporate Social Responsibility (CSR) initiatives which help address community needs. The Group will endeavour to continue this trend in Zimbabwe to make a meaningful positive impact on the economic and social well-being of the people of Zimbabwe.
Mr. Ruia added, “We have already committed to two funds of USD5 million each towards 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”.
About Essar Group:
The Essar Group is a multinational conglomerate and a leading player in the sectors of 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 MTPA steel capacity. The Group today employs 75,000 people across its operations in more than 25 countries in five continents. EAHL, part of the Essar Group, is a private company incorporated in Mauritius.
The Group continues to expand its global footprint, focusing on markets in Asia, Africa, Europe, the Americas and Australia. Essar invests significantly in the latest technology to drive forward and backward integration in its businesses, and on leveraging synergies between these businesses. It also focuses on in-house research and innovation to be a low-cost manufacturer with high quality products and innovative customer offerings.
Manish Kedia, Sr. VP Corporate Affairs, Essar Group
Phone: +91 98197 30092, firstname.lastname@example.org
Ganesh Pai, VP, Corporate Communications, Essar Group
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Rishon Chimboza, Senior Consultant, Africa Practice Group
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