15 November 2012

Zimbabwe: ZMDC Bids for Turnall Stake

THE Zimbabwe Mining Development Corporation has joined the race to acquire FBC Holdings' 58 percent stake in piping and roofing materials manufacturer Turnall Holdings. Sources said ZMDC seeks to regain controlling interest in Turnall after FBC decided to divest in line with Reserve Bank requirements for banks to concentrate on core business.

But more importantly, its decision to buy is driven by synergies between Turnall and Shabanie Mashava Mines, which produces asbestos fibre used in the manufacturing of pipes.

"ZMDC has submitted a bid because, traditionally, SMM Holdings was the majority shareholder in Turnall before SMM borrowed from FBC (and) the loan was secured against the Turnall equity. FBC is now selling because the RBZ said banks should focus on core business," the source said. Although its market value based on its current price on the Zimbabwe Stock Exchange of about US7c a share, is about US$27 million, the company's real value is thought to be around US$100 million. Market analysts also say the stock is tightly held.

ZMDC chairman Mr Goodwills Masimirembwa neither denied nor confirmed this and referred the questions to Mines and Mining Development secretary, Prince Mupazviriho.

"I cannot comment on the issue I suggest you get an official comment from Mines Permanent Secretary (Prince Mupazviriho).

Efforts to get a comment from Mr Mupazviriho were unsuccessful by the time of going to print yesterday.

Government assigned the Ministry of Mines and Mining Development last year, to oversee the resuscitation of SMM after the firm was taken out of administration, a recuperative process under a specialist.

The resumption of operations at SMM would provide critical feedstock to Turnall for the manufacture of asbestos based sheets and pipes.

Turnall is currently importing the raw material it so critically requires at a cost of US$12 million per annum.

And if this could be substituted with local procurement, the savings used in importing the asbestos raw material, the funding could be directed towards the recapitalisation of SMM.

Turnall was hit with a double blow after the closure of SMM in 2008, due to financial constraints and the banning of chrysotile asbestos in some of its major markets including South Africa. But it is poised for a bright future after installing a new plant to substitute the asbestos component in some of its products, enabling it to and resume exports especially to its lucrative market.

Turnall has also finally managed to convince Zinwa that its asbestos water pipes, made from imported chrysotile asbestos fibre, were safe to carry drinking water, which resulted in the reinstatement of a suspended multi-million dollar deal.

SMM sources said that the mining firm requires at least US$20 million to resume operations and plans are underway to revive activity in the next three months starting with Gaths Mine. This follows the decision the State owned ZMDC recently made to mobilise the requisite funding rather than continue to look for an investor to inject a substantial amount of fresh capital.

"With a minimum of US$20 million, the company will be able to start operations, but we intend to start with Gaths Mine, which requires about US$5 million to resume operations," said a source. FBC Holdings, FBC Bank's parent firm, gained a controlling stake in Turnall as a result of a US$8 million non-performing loan advanced to SMM by the Africa Export and Import Bank.

The loan came through FBC Bank. SMM which closed in 2008, pledged its shares in Turnall and Steelnet, now under court determined judicial management and General Beltings as security for the loan.

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