14 November 2012

Zimbabwe: Government, Essar Deal Hits Fresh Hurdle

THE resumption of operations at New Zim Steel hangs in the balance as the Ministry of Mines and Mining Development insists it will only cede iron ore claims at Mwanesi in Chivhu for their real value. The ministry wants the particular iron ore reserves to be made available to other players.

However, Essar Group wants guarantee of exploration rights at Mwanesi before starting operations.

It is understood that iron ore reserves at Mwanesi - believed to be over 30 billion tonnes - are the biggest known deposits in Zimbabwe.

The initial deal gave 80 percent ownership of iron ore reserves to Essar with Government taking the difference.

Mines and Mining Development Deputy Minister Gift Chimanikire said the ministry was against the shareholding structure.

"As a ministry, we are doing our own due diligence. We cannot be forced to sign a paper saying there are no objections when we have them.

"Our observation is that before that deal was signed, Government wholly owned the claims.

"The principle that all minerals belong to the State is of paramount importance and that was supposed to be taken into consideration than for one to rush and sign them off as if they are privately owned."

Government, Deputy Minister Chimanikire said, could not afford to give away huge iron ore deposits for no value.

He said there was also need to do away with creating monopolies.

"We have allocated sufficient claims to New Zim Minerals to enable them to operate. It is incorrect to assume that they are not operating because they don't have the claims.

"We don't want to create a monopoly by giving all the claims to one company.

"We have to allow other players, for instance, indigenous players should also be able to explore the ore.

"Already we have been approached by two new indigenous companies who are interested in smelting iron ore in Chivhu and Mvuma. They have very viable proposals. They have good partnership proposals," said Deputy Minister Chimanikire.

He said the Cabinet inter-ministerial committee created to look into the Essar deal was supposed to be guided by the need to promote indigenisation and economic empowerment and avoid monopolising iron ore exploration.

Deputy Minister Chimanikire said Essar's primary objective was to refurbish the steel plant, something they were yet to do.

However, Industry and Commerce Minister Welshman Ncube said the Ministry of Mines and Mining Development was just supposed to transfer the ownership of iron ore claims from Buchwa Iron Mining Company (Bimco) and Zisco to New Zim Minerals and New Zim Steel respectively.

He said Cabinet recently endorsed the initial deal that gave the investor 80 percent ownership of the iron ore reserves.

"The Minister of Mines and Mining Development (Dr Obert Mpofu) has already written to us and the investor indicating that there were no objections with claims at Buchwa and Ripple Creek," said Minister Ncube.

"All that was left were the terms and conditions. We agreed that there has to be a joint venture exploration to determine the quantity and quality of iron ore at Mwanesi."

Minister Ncube said operations would only start if Essar approved the implementation matrix agreed to by the Government and Essar management.

He said Government had sorted its side of the bargain.

"We worked on an implementation matrix with them on what was supposed to be done by Government and what they (Essar) were supposed to dowithin the given timeframes," he said.

"They have since written to us requesting additional information on the implementation matrix and an explanation on the joint venture exploration.

"On our side we are ready because we have done everything on the matrix.

"Operations will start immediately after approval of the matrix by the Essar board."

Government, Minister Ncube said, had resolved all the issues around the supply of water and energy, transportation of coal and steel and investment incentives which it was supposed to do.

He said all the ministries, except the Ministry of Mines and Mining Development, had fulfilled their mandates.

On its part, the investor, Minister Ncube said, was supposed to take over the plant and set up a US$10 million fund for the youths and small to medium enterprises.

He said Essar was also supposed to pay the Zisco debt to China and Germany.

Minister Ncube recently said Essar workers who have not been paid since March this year would be paid as soon as operations start.

There have been concerns over the part of the deal involving the transfer of iron ore reserves to Essar, and Minister Mpofu has expressed reservations with the 80 percent shareholding of the reserves by New Zim Minerals.

He said the deal was supposed to be revisited because Essar would pay only US$700 million for resources worth over US$30 billion.

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