Two foreign firms from South Africa and India are eyeing a significant stake in the country’s second largest ferrochrome producer, Zimbabwe Alloys (ZimAlloys).
ZimAlloys has been searching for investors to inject cash in its operations despite the risk of losing half of its mining claims to government.
A former subsidiary of Anglo American Corporation, ZimAlloys was sold to a consortium of local businessmen, who included banker Farai Rwodzi and Savanna Tobacco founder Adam Molai in 2005.
It was placed under final judicial management in 2013 due to poor performance attributed to the closure of its four furnaces, poor commodity prices and escalating costs.
The firm has not engaged in mainstream mining and is only processing chrome from its dumps which were estimated at four million tonnes in 2015.
Insiders close the deal said Grant Thornton Zimbabwe was evaluating proposals from the two companies and is expected to settle for a deal that makes “business sense for ZimAlloys shareholders”.
“What they are looking for is a company that has the resources; this includes setting up furnaces, right brains, a viable business plan and market for the chrome. Two companies made it to the final stages of the vetting process and all are prepared to invest as much as US$100 million into this project,” an insider close to the deal said.
ZimAlloys judicial manager Reggie Saruchera confirmed to the Financial Gazette that two companies had been shortlisted.
“The bids are still under consideration. We are in the process of finalising the selection of a suitable partner,” he said.
Saruchera, however, refused to disclose the names of the bidders, saying he was “not able to disclose the identity of the firms at the moment”.
The interest in ZimAlloys comes at a time when chrome exports more than trebled to US$42 million in February, up from US$10 million during the same period last year on the back of increased output.
In January, chrome exports increased to US$28 million, from US$7 million in 2015.
Last week, Minister of Mines and Mining Development, Walter Chidhakwa, said the performance of chrome was on target to reach US$300 million worth of exports by year-end.
“Chrome producers in 2016 contributed US$30 million to the fiscus, translating to one percent of Zimbabwe’s mineral value,” said Chidhakwa.
Zimbabwe’s chrome industry is set for a rebound this year as world ferrochrome prices are expected to continue on the upward trend following years of declining returns.
According to the International Chromium Development Association, South Africa and Zimbabwe hold about 90 percent of the world’s chromite reserves and resources, with the former having reserves of about 3,1 billion tonnes and a further estimated resource of 5,5 billion tonnes.
ZimAlloys owns 1 052 claims covering 39 175 hectares.
ZimAlloys and Sinosteel’s Zimasco controlled about 80 percent of Zimbabwe’s chrome ore claims. In June last year, government ordered that both firms surrender half of their claims.
The Chinese-owned Zimasco has since ceded half of its mining claims to government.
ZimAlloys is yet to comply with the directive and analysts said the manner in which it will deal with the matter will be key in attracting any potential investor.
Government began engaging ZimAlloys in January to come up with an agreement for the release of chrome fields to the State.
If an agreement is reached, the chrome fields ceded to government would be given to small scale miners, according to Chidhakwa. Financial Gazette