Published: 09 May 2014

Essar Africa Holdings Limited will release more than $450 million to clear most of NewZim Steel's (formerly Zisco Steel) debt and pave the way for the operationalisation of the company.

In addition to paying off the company's more than $246 million Chinese and German debt, Essar has agreed to pay off more than $204 million in employee benefits and arrears.

This development comes as Government and Essar this week reached an agreement and reaffirmed their commitment to completing the process.

The project has been in limbo for years as the two parties have been failing to agree to some sticking points, putting the livelihood of more than 3000 workers on hold.

Industry and Commerce minister Mike Bimha today said the deal would follow through as per the initial bid provisions.

According to the original deal, Essar Group would take 53 percent of New Zim Steel and 80 percent of New Zim Minerals (former Buchwa Iron Mining Company – mining arm) while the Government takes the remaining shares in both firms.

"As per the initial bid provisions, the initial phase of the project will involve the revival of NewZim Steel to a production capacity of 500 000 tonnes per annum of liquid steel within 24 months which would be increased to 1,2 million tonnes per annum in the second phase," he said.

He said NewZim Minerals would work on exploration and development of an iron ore beneficiation plant which will involve the blending of the iron ore from Chivhu and Ripple creek to improve the quality of feedstock to the steel plant.

He said the investor had also agreed to implement immediate interim measures which would inject funding into the company and offer relief to employees.

"It has been agreed to revive operations at Lanchashire Steel using imported feedstock over the course of the next six months. In addition, it has been agreed to import certain steel products for sale through some existing NewZim Steel distribution centres," he added.

Minister Bimha also said the investor had agreed to hold meetings with creditors with the view to settling the company's debts.

Essar Holdings director Firdhose Coovadia said teams were already on the ground at NewZim Steel and in India to establish the work that needed to be done.

Said most of the plant in Redcliff would be dismantled and replaced with new equipment and technology.

"Our teams which include the Chinese contractor have been on the ground for the last two weeks and we have been having meetings to establish the work needed to be done and the cost and so far we are happy. We are also engaging local contractors for the dismantling of the old plant," he said.

He added that Government on its part had agreed to assist in the acquisition of work permits for support staff that will arrive in the country next week,

He said the initial phase would cost $650 million. This is different from the initial projection that the whole project would cost $750 million and Coovadia said this was because of the level of work that will be involved in knocking down the plant and installing a new one.

"The investment is in new technology which will make Zimbabwean steel more competitive globally," he said.
- BH24

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