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Mauritian firm is eyeing a 33 percent stake in the local company.
Well-placed sources told Herald Business that Essar Africa was on the verge of agreeing terms with RioZim on how it could muscle into the listed mining firm.
“Essar is on the verge of concluding a deal with RioZim. As you are aware RioZim want to raise US$40 million through a rights offer,” said the source.
Essar Global vice-president Mr Ravi Ruia confirmed last week that the Indian group was interested in RioZim, although no agreement had been reached.
“No agreement has been reached yet and we are still assessing the opportunity,” he said.
But RioZim managing director Mr Josh Sachikonye recently dispelled talk that the Zimbabwe Stock Exchange-listed firm was involved in talks with Essar Africa.
“I do not have an agreement with Essar,” said Mr Sachikonye, without explaining.
Efforts to get further comment from Mr Sachikonye were not successful last Friday as he declined to explain. He said he was in Kariba and would only be back today.
But Essar resident director for Africa and the Middle East, Mr Firdhose Coovadia, could neither deny nor confirm the Mauritius-based firm would invest in RioZim. He hinted, instead, on the possibility of an equity deal with the gold miner.
“We have not finalised anything, but as the vice-chairman said we are looking for opportunities everywhere. We have not come to a stage where we can say a lot. We will give details once there is something concrete,” he said.
Herald Business understands Essar is looking to capitalise on RioZim’s huge appetite for cash as evidenced by the US$40 million rights issue it is preparing.
The US$40 million rights issue is the biggest cash caller on the market post-dollarisation and it remains to be seen how shareholders will respond.
RioZim intends to spend US$13,8 million on retiring local debts, US$9 million on refurbishing the plant at Renco and Empress Nickel Refinery and US$1 million on for acquisition of exploration and prospecting orders.
The balance would be spent on new projects, including Darwendale, Sengwa, Chimakasa, Cam and Motor, Kenilworth. This is expected to raise output to 1 500kg annually by 2015 from about 1 000kg at the moment.
While RioZim is planning to ask shareholders for US$40 million, it may not resist the temptation to accept the proposal from cash-rich Essar Africa.
Essar Africa has already demonstrated its appetite for Zimbabwean assets by swooping on a 54 percent stake in Ziscosteel after buying 60 percent of the Government’s stake.
Under the deal Essar Africa pledged to clear Ziscosteel’s US$340 million external debts, releasing the Government of the choking debt obligation. Essar Africa will part with US$750 million as investment in Ziscosteel.
The Essar Group is a multinational conglomerate with interests in steel, oil and gas, power, communications, shipping and logistics, projects and minerals.
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