News / Local
Kuvimba: How to hide a mining giant in plain sight
10 Jan 2021 at 08:10hrs | Views
A year ago, Kuvimba Mining House did not exist. now it could be the country's biggest gold producer.
How? The answer shows how transparency is still not a thing for Zimbabwean authorities.
In December, President Emmerson Mnangagwa toured Shamva Mine, a gold mine recently sold by Mzi Khumalo's Metallon Corporation. Amid all the ribbon-cutting and chest-thumping, it was revealed that the mine was now owned by Kuvimba.
David Brown, CEO of Kuvimba, handed over share certificates to Finance minister Mthuli Ncube, and it was announced that the government owned 65% of Kuvimba.
For anyone who had followed recent acquisitions in mining, all this made one raise an eyebrow.
Here is why:
Puzzle one: Shamva,
BNC when Shamva was sold, the buyer was announced as Sotic International, a Mauritius-based company backed by Almas Global Opportunity Fund, a firm registered in the Cayman Islands. Brown, who is Sotic CEO, said Shamva was just one of other gold mines that the company was targeting for acquisition.
"we want to become a significant player in the gold industry in Zimbabwe," Brown said in July last year. It was reported that Sotic's local arm, Landela, would run Shamva.
In 2019, the same company, Sotic, bought 74,73% of Bindura nickel Corporation (BnC), the country's sole nickel miner, as well as Freda Rebecca gold mine, from Asa Resources.
That transaction, worth Z$3,5 billion, was completed in September last year. soon after, BnC announced in a Zimbabwe stock exchange filing that Sotic would place the 74,74% BNC shares in the hands of a local company, Kuvimba.
"On September 22, 2020, the shares were, in terms of the Agreement, transferred to Kuvimba Mining House (Private) Limited, a limited liability company duly incorporated in accordance with the laws of Zimbabwe."
Trojan nickel mine: One of Kuvimba Mining's assets so, who owns Kuvimba? Government says it owns the majority 65%. The stake is held through the sovereign wealth fund, the national Venture Capital Fund, and the Insurance and Pensions Commission. There is also the war Veterans Fund and the national Youth Fund. Little is known about these two funds.
The other 35%, it turns out, is owned by another locally-registered company, Ziwa Investments, which is in turn owned by a Mauritius-registered investment fund called Quorus. There is no disclosure on the beneficial owner of these two firms.
Brown says Sotic is not involved with Kuvimba, having ceded BNC stock to local ownership.
So, Sotic, a foreign-registered company, bought and paid for Shamva and BNC, only to hand over those shares to a separate entity, now majority-owned by the government?
Puzzle two: ZMDC
In June, the Ministry of Finance announced that Landela Mining was the winning bidder for "ZMDC gold assets and Sandawana Mine".
These ZMDC mines include Jena, Golden Kopje, Elvington and Sandawana. now, these companies are being listed as part of Kuvimba's portfolio in government pronouncements. In total, currently, these gold mines are yielding around 300kg of gold per month.
so, on one hand, government claims to have disposed of its mines, while, on the other hand, claims to now hold 65% of the same company that we are told took over those same mines.
Puzzle three: GDI
In October 2019, Great Dyke Investments (GDI), which is developing what would be Zimbabwe's largest platinum mine near Darwendale, announced Landela Mining as its local 50% partner. In December, GDI sold a 4,4% stake to Fossil Mining, led by GDI board member Owen Chimuka, in order to raise Us$30 million to develop the mine.
Zimbabwe Russia Platinum Great Dyke
That left Russian company Vi Holding, run by Vitaliy Machitski, and Landela, each with a 47,8% stake.
Just like all the other assets previously said to have been bought by either Landela or Sotic, the GDI stake is now being listed by government officials as part of Kuvimba's portfolio of assets.
The Tagwirei axis
Everyone involved around Kuvimba has been keen to make one big point; businessman Kuda Tagwirei is not involved in the company.
"Tagwireyi is not involved at all; we did our due diligence," Ncube says. "All the entities in the 65% are state-owned."
Government claims that its contribution of assets accounts for the 65% in Kuvimba. However, this would suggest a valuation of all the assets has been done to give the split. There has been no such valuation.
It's easy to see why officials want so desperately to distance Kuvimba from Tagwirei. He is on the US sanctions list, and any association with Kuvimba diminishes the company's capital-raising opportunities. Tagwirei himself would be keen not to have his businesses traced back to him.
However, it's hard to place Tagwirei too far away from these businesses. With no full disclosure, Kuvimba appears to be an elaborate structure meant to protect both the interests of the state and Tagwirei himself.
This would be a remarkable role reversal. For long, it's been alleged Tagwirei has been used by the Zimbabwean government to circumvent financial sanctions.
Firstly, when Sotic bought BNC, it appointed Christopher Fourie and Jozef Behr to the board. Fourie is a director of Sotic, while Behr is the company's head of trading.
Fourie, an investment banker, has served as head of Mergers and Acquisitions at Puma Energy, which is jointly owned by Trafigura and Sonangol, and was until 2020 the Zimbabwe partner of Tagwirei's Sakunda Holdings. Trafigura cut off Sakunda as the US prepared sanctions against Tagwirei.
BNC also appointed Chimuka, a Tagwirei associate and Landela's nominee to the GDI board. Another board appointment was Craig Meerholz, executive director of Sotic and former head of Africa for Trafigura.
ZimAlloys, a company already known to have been bought by Tagwirei, is also being listed under Kuvimba.
Also of note is how Brown, the former Implats boss, has variously been presented as CEO of Sotic, Landela, and now Kuvimba.
Kuvimba: The game plan
So, why does Zimbabwe need Kuvimba?
Ncube's justification for the company, opaque structure and all, is remarkable.
Earnings from the company, he said, will be used to raise money to compensate pensioners, and even to pay displaced white commercial farmers.
In his 2021 budget, Ncube said he was setting up a US$75 million fund to compensate some pensioners who lost value. Farmers who signed to the US$3.5 billion compensation deal would be paid partly by money raised offshore. There was no mention of using mineral resources for either debt.
ZMDC's old mines are desperate for investors, but quality buyers have stayed away.
Kuvimba has a long list of acquisition targets on the table. To add to BNC, Shamva and the ZMDC mines, the company is also targeting Globe & Phoenix Mines, the idled Kwekwe gold mine that has been overrun by illegal miners for two decades.
Mazowe Mine, another Metallon mine, could be acquired this year, according to Brown.
Kuvimba says its total assets are valued at US$1,5 billion. It is looking to raise another US$1 billion to fund exploration, new acquisitions and development, Brown says.
"We require about US$1 billion to build our mines and ensure that catch-up capital is made," according to Brown. "This will be done over time."
Kuvimba has an ambitious target of 500 000 ounces of gold per year. That would vault it to the top of the mining pecking order, at a time most miners are struggling for capital.
Hidden in plain sight
After failing to attract new, large-scale mining investment, it was inevitable that Zimbabwe would have to look within. A tender for ZMDC assets in 2018 attracted 151 bidders, but the sale was abandoned, purportedly for lack of quality buyers.
Not only does Zimbabwe offer new, greenfield investment opportunities - exploration alone has been woefully inadequate - the country also has a range of idle mines that are crying for investors with an appetite for risk.
Recently, credible companies such as Padenga and Caledonia Mining have stepped up investment in mines and claims that have been idle for years.
If Kuvimba meets its production and acquisition targets, it would potentially become Zimbabwe's largest gold producer. Shamva Mine alone has a resource of 2,5 million ounces of gold. Freda expects 2 800kg in the year to March, which would beat RioZim, which produced 1 658kg from its three mines in 2019, and Blanket Mine, which projects 1 600kg in 2020.
However, instead of full disclosure on the structuring of this potentially influential firm, government and all others involved have chosen to hide it among scattered puzzle pieces.
Everyone involved has chosen to be cagey about how Kuvimba came about, and how government came to hold 65% in a company with assets that were initially acquired by Tagwirei's Sotic and Landela.
This is the question government needs to answer: How did this mix of state-owned mines and privately-held mines bought by a private company end up all in the hands of a new single company that government now claims to control?
Zimbabwe's government is yet again failing a transparency test in its management of mining resources.
The answer to the puzzles, as is always the case, will inevitably show when it's time to put in new capital, and to share the spoils.
How? The answer shows how transparency is still not a thing for Zimbabwean authorities.
In December, President Emmerson Mnangagwa toured Shamva Mine, a gold mine recently sold by Mzi Khumalo's Metallon Corporation. Amid all the ribbon-cutting and chest-thumping, it was revealed that the mine was now owned by Kuvimba.
David Brown, CEO of Kuvimba, handed over share certificates to Finance minister Mthuli Ncube, and it was announced that the government owned 65% of Kuvimba.
For anyone who had followed recent acquisitions in mining, all this made one raise an eyebrow.
Here is why:
Puzzle one: Shamva,
BNC when Shamva was sold, the buyer was announced as Sotic International, a Mauritius-based company backed by Almas Global Opportunity Fund, a firm registered in the Cayman Islands. Brown, who is Sotic CEO, said Shamva was just one of other gold mines that the company was targeting for acquisition.
"we want to become a significant player in the gold industry in Zimbabwe," Brown said in July last year. It was reported that Sotic's local arm, Landela, would run Shamva.
In 2019, the same company, Sotic, bought 74,73% of Bindura nickel Corporation (BnC), the country's sole nickel miner, as well as Freda Rebecca gold mine, from Asa Resources.
That transaction, worth Z$3,5 billion, was completed in September last year. soon after, BnC announced in a Zimbabwe stock exchange filing that Sotic would place the 74,74% BNC shares in the hands of a local company, Kuvimba.
"On September 22, 2020, the shares were, in terms of the Agreement, transferred to Kuvimba Mining House (Private) Limited, a limited liability company duly incorporated in accordance with the laws of Zimbabwe."
Trojan nickel mine: One of Kuvimba Mining's assets so, who owns Kuvimba? Government says it owns the majority 65%. The stake is held through the sovereign wealth fund, the national Venture Capital Fund, and the Insurance and Pensions Commission. There is also the war Veterans Fund and the national Youth Fund. Little is known about these two funds.
The other 35%, it turns out, is owned by another locally-registered company, Ziwa Investments, which is in turn owned by a Mauritius-registered investment fund called Quorus. There is no disclosure on the beneficial owner of these two firms.
Brown says Sotic is not involved with Kuvimba, having ceded BNC stock to local ownership.
So, Sotic, a foreign-registered company, bought and paid for Shamva and BNC, only to hand over those shares to a separate entity, now majority-owned by the government?
Puzzle two: ZMDC
In June, the Ministry of Finance announced that Landela Mining was the winning bidder for "ZMDC gold assets and Sandawana Mine".
These ZMDC mines include Jena, Golden Kopje, Elvington and Sandawana. now, these companies are being listed as part of Kuvimba's portfolio in government pronouncements. In total, currently, these gold mines are yielding around 300kg of gold per month.
so, on one hand, government claims to have disposed of its mines, while, on the other hand, claims to now hold 65% of the same company that we are told took over those same mines.
Puzzle three: GDI
In October 2019, Great Dyke Investments (GDI), which is developing what would be Zimbabwe's largest platinum mine near Darwendale, announced Landela Mining as its local 50% partner. In December, GDI sold a 4,4% stake to Fossil Mining, led by GDI board member Owen Chimuka, in order to raise Us$30 million to develop the mine.
Zimbabwe Russia Platinum Great Dyke
That left Russian company Vi Holding, run by Vitaliy Machitski, and Landela, each with a 47,8% stake.
Just like all the other assets previously said to have been bought by either Landela or Sotic, the GDI stake is now being listed by government officials as part of Kuvimba's portfolio of assets.
The Tagwirei axis
Everyone involved around Kuvimba has been keen to make one big point; businessman Kuda Tagwirei is not involved in the company.
"Tagwireyi is not involved at all; we did our due diligence," Ncube says. "All the entities in the 65% are state-owned."
Government claims that its contribution of assets accounts for the 65% in Kuvimba. However, this would suggest a valuation of all the assets has been done to give the split. There has been no such valuation.
It's easy to see why officials want so desperately to distance Kuvimba from Tagwirei. He is on the US sanctions list, and any association with Kuvimba diminishes the company's capital-raising opportunities. Tagwirei himself would be keen not to have his businesses traced back to him.
However, it's hard to place Tagwirei too far away from these businesses. With no full disclosure, Kuvimba appears to be an elaborate structure meant to protect both the interests of the state and Tagwirei himself.
This would be a remarkable role reversal. For long, it's been alleged Tagwirei has been used by the Zimbabwean government to circumvent financial sanctions.
Firstly, when Sotic bought BNC, it appointed Christopher Fourie and Jozef Behr to the board. Fourie is a director of Sotic, while Behr is the company's head of trading.
Fourie, an investment banker, has served as head of Mergers and Acquisitions at Puma Energy, which is jointly owned by Trafigura and Sonangol, and was until 2020 the Zimbabwe partner of Tagwirei's Sakunda Holdings. Trafigura cut off Sakunda as the US prepared sanctions against Tagwirei.
BNC also appointed Chimuka, a Tagwirei associate and Landela's nominee to the GDI board. Another board appointment was Craig Meerholz, executive director of Sotic and former head of Africa for Trafigura.
ZimAlloys, a company already known to have been bought by Tagwirei, is also being listed under Kuvimba.
Also of note is how Brown, the former Implats boss, has variously been presented as CEO of Sotic, Landela, and now Kuvimba.
Kuvimba: The game plan
So, why does Zimbabwe need Kuvimba?
Ncube's justification for the company, opaque structure and all, is remarkable.
Earnings from the company, he said, will be used to raise money to compensate pensioners, and even to pay displaced white commercial farmers.
In his 2021 budget, Ncube said he was setting up a US$75 million fund to compensate some pensioners who lost value. Farmers who signed to the US$3.5 billion compensation deal would be paid partly by money raised offshore. There was no mention of using mineral resources for either debt.
ZMDC's old mines are desperate for investors, but quality buyers have stayed away.
Kuvimba has a long list of acquisition targets on the table. To add to BNC, Shamva and the ZMDC mines, the company is also targeting Globe & Phoenix Mines, the idled Kwekwe gold mine that has been overrun by illegal miners for two decades.
Mazowe Mine, another Metallon mine, could be acquired this year, according to Brown.
Kuvimba says its total assets are valued at US$1,5 billion. It is looking to raise another US$1 billion to fund exploration, new acquisitions and development, Brown says.
"We require about US$1 billion to build our mines and ensure that catch-up capital is made," according to Brown. "This will be done over time."
Kuvimba has an ambitious target of 500 000 ounces of gold per year. That would vault it to the top of the mining pecking order, at a time most miners are struggling for capital.
Hidden in plain sight
After failing to attract new, large-scale mining investment, it was inevitable that Zimbabwe would have to look within. A tender for ZMDC assets in 2018 attracted 151 bidders, but the sale was abandoned, purportedly for lack of quality buyers.
Not only does Zimbabwe offer new, greenfield investment opportunities - exploration alone has been woefully inadequate - the country also has a range of idle mines that are crying for investors with an appetite for risk.
Recently, credible companies such as Padenga and Caledonia Mining have stepped up investment in mines and claims that have been idle for years.
If Kuvimba meets its production and acquisition targets, it would potentially become Zimbabwe's largest gold producer. Shamva Mine alone has a resource of 2,5 million ounces of gold. Freda expects 2 800kg in the year to March, which would beat RioZim, which produced 1 658kg from its three mines in 2019, and Blanket Mine, which projects 1 600kg in 2020.
However, instead of full disclosure on the structuring of this potentially influential firm, government and all others involved have chosen to hide it among scattered puzzle pieces.
Everyone involved has chosen to be cagey about how Kuvimba came about, and how government came to hold 65% in a company with assets that were initially acquired by Tagwirei's Sotic and Landela.
This is the question government needs to answer: How did this mix of state-owned mines and privately-held mines bought by a private company end up all in the hands of a new single company that government now claims to control?
Zimbabwe's government is yet again failing a transparency test in its management of mining resources.
The answer to the puzzles, as is always the case, will inevitably show when it's time to put in new capital, and to share the spoils.
Source - the standard
