The multi-million-dollar deal for Zisco's revival edged closer to reality after Government and Essar agreed this week to operationalise the firm with immediate effect.
Industry and Commerce Minister Mike Bimha told journalists yesterday that both parties had reaffirmed their commitment to the project.
Founder and chair of Essar Global -holding company Essar Holdings - Mr Ravi Ruia was in Zimbabwe last week and paid a courtesy call on President Mugabe to reaffirm their commitment, Minister Bimha said.
The minister said Zisco, now NewZim Steel, would resume production within two years, and US$650 million would be spent under phase one to restart production at 500 000 tonnes per annum.
"As per the original bid provisions, the initial phase of the project involves revival of NewZim Steel production capacity of 500 000 tonnes within 24 months, which will be increased to 1,2 million tonnes in the second phase," he said.
Minister Bimha said all parties in 2013 fulfilled their obligations though a few minor outstanding issues remained to be resolved by relevant Government departments.
Essar signed a US$750 million deal about three years ago for a 54 percent stake, but the investment would now significantly surpass initial estimates due to price changes.
In line with the results-based implementation imperatives of the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, the project will also be overseen by the Office of the President and Cabinet.
Government and Essar have agreed to immediately implement interim measures that include injecting fresh funds into NewZim Steel to kickstart revival and offer relief to workers.
The parties will import feedstock in the next six months for sale through existing NewZim Steel distribution centres.
Meetings with creditors will begin next week to agree on debt settlement modalities.
Essar Holdings director (Middle East and Africa) Mr Firdhose Coovadia said KFW of German was owed US$187 million, Sino Sure US$49 million and local liabilities totalled US$204 million.
Of the total local liabilities, US$110 million is related to employee benefits and pension fund obligations.
Mr Coovadia said they would completely replace old technology to make the plant globally competitive.
"Zimbabwe currently consumes only 100 000 tonnes of steel per annum. Even if you triple consumption, you will still need to export more than 200 000 tonnes annually," he said.
Essar is undertaking exploration and developing an iron ore beneficiation plant in Chivhu. The ore will be blended with produce from Ripple Creek Mine in Redcliff to improve feedstock quality.
Staff will undergo training locally, in India and in China.
The resumption of steel production includes evaluations of prices of equipment, establishment of local fiscal regime and relocation of staff to relevant work stations.
Essar will build a 600-megawatt power plant in two phases, and excess power will feed the national grid.
Minister Bimha said NewZim Steel's revival had taken long because of the extensive processes, including engagement of various local and foreign creditors. He also said complexities in decision-making during the inclusive Government caused delays.