Kuvimba to pour US$1,3bn into Zisco revival

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 (Ziscosteel).

The once vibrant steel giant, ceased operations nearly a decade and half ago.

Kuvimba, which has an array of mining assets, is targeting annual steel output of one million tonnes, The Sunday Mail Business can reveal.

On Tuesday, Cabinet approved the partnership between Ziscosteel and Kuvimba — one of the country's largest mining outfits with interests in gold, platinum, chrome and nickel — for the resuscitation of the steel producer.

Kuvimba is 65 percent owned by various State vehicles, while the remainder is owned by management.

The mining giant, which is less that two years old, won the tender to revive Ziscosteel, which was once Africa's largest integrated steel works, ahead of six other bidders.

Ziscosteel 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 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 and Development Agency), some Government ministries, SERA (State Enterprises Restructuring Agency) among other stakeholders, I am quite confident that they will deliver.

"It took time to be convinced, but I think that was necessary."

Sources said Kuvimba pledged to invest US$1,3 billion into reviving Ziscosteel over three years from the date of signing the contract, mainly focusing 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 targeted one million tonnes per year.

It is projected Ziscosteel would generate US$270 million from mining operations annually, which would be re-invested in the steel works and unlock capacity to borrow more.

It is also envisaged that this would be achieved through a five-point plan to be executed over the three-year period that entails restructuring Zisco's corporate operating model, crafting a new commercially viable turnaround strategy, recapitalising Zisco's finances and arranging the capital injection to kickstart 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 Ziscosteel, 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 Ziscosteel 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.