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Martin Kadzere Harare Bureau
INDIAN conglomerate Essar Holdings has started negotiations with holders of Hwange coal concessions with a view to establishing joint ventures to extract the mineral to power its planned 600-megawatt thermal power station, sources have said.In 2010, Essar agreed to buy 54 percent of Ziscosteel, now NewZim Steel, in a deal initially worth $750 million but the deal ran into problems over mineral rights that were to be given to the company’s subsidiary, NewZim Minerals.
The multi-million-dollar deal for NewZim Steel’s revival, however, edged closer to reality recently when the government and Essar agreed to immediately operationalise the firm.
NewZim Steel would resume production within two years, and $650 million would be spent under phase one to restart production at 500,000 tonnes per annum.
The company wants to build a 600MW power plant to supply electricity to NewZim Steel, with excess being sold to national power utility Zesa Holdings. NewZim Steel is expected to consume 300MW.
According to sources familiar with the negotiations, Essar is not convinced Hwange Colliery has capacity to supply the coal required for the plant. As such they are engaging other concession holders to cover the potential deficit.
Over 20 companies were granted special grants for coal and coal-bed methane gas about three years ago in the Hwange, Gwayi, Lupane and Binga districts, but only a few have completed exploration and started mining operations.
These claims could be repossessed by the government under the “use it or lose it” policy.
“We have negotiations on at least three of these claims and we have good business rapport with the Essar regional representative who has shown significant interest on exploitation of these claims,” said a source who requested not to be named.
The source added that Essar Africa had approached the government seeking the green light to engage “those local concession holders” for potential joint ventures.
“In terms of timelines, the deal is already at an advanced stage and Industry and Commerce Minister Mike Bimha has approved the deal.
“The group is always keen on leveraging its expertise in an array of sectors to make its investments profitable.
“Setting up of a power generation plant is a bold step by the giant steel making company towards making the steel making factory self sufficient,” said the source.
The move by Essar will bring more activity around the mining district where some companies own large – but idle – coal claims.
Another notable in the Essar deal are plans to refurbish the rail transportation system.
The arrangement will see the refurbishment of the Hwange-Kwekwe rail link as well as construction of a railway line between Chivhu and Beira.
derick.khumalo