ZIMCOKE has launched a US$25 million bid for Hwange Colliery Company Limited’s underground mine known as 3-Main as part of its controversial deal of taking over Zimbabwe Iron and Steel Company (ZISCO) assets.
ZimCoke, a local investment vehicle fronted by Bulawayo South legislator, Eddie Cross, is locked in a vicious fight with ZICSO’s new board over the control of the key assets of once Africa’s largest integrated steelworks.
ZISCO stopped operations in 2008, plagued by lack of capital and mismanagement. With its furnaces having the capacity to produce up to one million tonnes of steel per year, the company was among Zimbabwe’s major foreign currency earners.
ZimCoke intends to acquire some of ZISCO’s assets including 328 hectares of land worth US$16 million, plant and machinery valued at US$168 million, railway wagons and related infrastructure (US$4 million), 48 percent shareholding in Zimbabwe Chemicals (US$23 million) and waste products plant (US$16 million).
The deal entails ZimCoke assuming the US$225 million debt owed to German bank, KfW GBMH for the assets.
The transaction has been marred with acquisitions and counter acquisitions, with the ZISCO board led by economist Dr Gift Mugano, claiming it is “a typical case of asset stripping” while Cross blames the board for sabotage.
Last year–after its appointment–the ZISCO board directed the management to analyse the ZimCoke deal and its impact on the resuscitation of the company. A decision was then taken to terminate the deal on the basis that it made the revival of ZISCO impossible since some of its major components would become inaccessible.
The Cabinet was advised about the deal that in its original form would impinge the revival of ZISCO as an integrated steelworks. A decision was then made to review the deal but the board held on to its earlier position after it was realised that the debt, which the ZimCoke purported to have taken over was still in the books of ZISCO.
The board cited gross violation of Public Entities and Corporate Governance Act since the previous board led by Nyasha Makuvise was not involved. In fact, the former board chairman signed exoneration letters, confirming they were not involved in the deal. The board also claims that valuations of assets were not properly done.
Last week, Cross, the former opposition politician said the debt assumption agreement had been finalised with KfW GBMH based in
Frankfurt and would be signed by all parties when the transfer of title is effected.
He disclosed that ZimCoke was also looking at acquiring Hwange’s underground mine, which produces low ash content coal suitable for coke production. This was to ensure adequate supplies of coking coal to coke oven batteries at ZISCO. ZimCoke is looking at rehabilitating battery number 3 and rebuild number 4.
The company would consider rebuilding battery 1 and 2 at a later stage upon the completion of some works including repair or replacement of all service units and the by-products plant, rehabilitation of the railways lines from Hwange to Redcliff and all internal rail sidings at
Redcliff as well as the line to Beitbridge from Redcliff.
Cross claimed ZimCoke intends to acquire a fleet of 500 wagons and 25 locomotives to move the bulk products involved. The Redcliff water system will also be upgraded to ensure adequate supplies to the plant.
“To supply the coal to the plant, application has been made to Hwange Colliery to take over the underground mine known as 3 Main,” said
Cross. “If this is secured, we will have to invest in the mine and the required infrastructure (washing plant and loading facilities. Hwange is also considering making its coke ovens available to us and if we take up this opportunity we will have to secure further funding to rehabilitate this.
“This will raise total capacity to 1,2 million tonnes (of coke) and will require 1,5 million tonnes of coal,” he added.
Hwange decommissioned its coke oven battery in 2014 after it become too expensive to operate. Prior to the decommissioning, Hwange, now the country’s second largest coal miner exported coke to copper smelters in Zambia and the Democratic Republic of Congo. Hwange spokesperson Rugare Dhobie declined to comment but well placed source in the company confirmed the proposal was made recently.
If the deal sails through, this would create uncertainty for the future of Hwange whose life span has been significantly reduced after the Government recently withdrew concessions, which would have extended its life span.
Cross said it is expecting to generate US$300 million from coke sales of 1,2 million tonnes per year and an additional US$50 million from the by-products. The company was finalising offtake agreements with buyers from Africa and Zambia and DRC where it intends to export a combined 450 000 tonnes of coke per year. Off take discussions are also ongoing with Zimbabwe’s ferrochrome and steel producers, ZimCoke said.
“It will take some time to get to these volumes, which are determined by market developments in the region but it is expected to reach this level in five years,” said Cross.