Source: Zimasco emerges from voluntary judicial management – NewsDay Zimbabwe March 13, 2018
KWEKWE-BASED Zimbabwe Mining and Smelting Company (Zimasco) has just emerged from voluntary judicial management and currently enjoying good global prices of chrome. Company CEO John Musekiwa (JM) recently spoke to NewsDay(ND) reporter Blessed Mhlanga on various issues including challenges being faced by the country’s mining sector.
By Blessed Mhlanga
ND: Miners are complaining that the price of power has had an adverse effect on production and profitability, can you explain this in details, and does this also affect you?
JM: In our cost structure electricity is the biggest contributor to our cost of production at about 35%. So it is a major cost driver of our profitability.
Given that we deal in a commodity, where we are price takers and where the global market price fluctuates for reasons beyond our control, it is important to manage our production cost and as an industry we continue lobbying government to reduce the cost of power to improve our competitiveness.
ND: At the moment, how much are you paying for power and what price do you would be ideal?
JM: The tariff for large-scale users like ferrochrome smelters is 6,7 cents per kilowatt hour and it is our hope that it will be reduced to around four cents per kilowatt hour.
ND: Do you think four cents per kilowatt hour would take you flying to profitability or break-even point?
JM: That will make us profitable and competitive.
ND: Let’s talk about the current prices of ferrochrome, what price are you selling at right now?
JM: Ferrochrome prices dropped in 2015 and into early 2016, which saw many global ferrochrome producers, including Zimbabwean smelters, curtail or stop operations altogether.
This led to a shortage of material in the global market, which saw prices recover from around September 2016 up until May 2017 when another downturn was experienced.
The end of 2017 and the beginning of 2018 has seen a recovery in prices to reasonable levels, which we are experiencing now.
ND: You are coming out of voluntary judicial management, what motivated you to get into judicial management and what has changed since then?
JM: Voluntary judicial management gave us an opportunity to reorganise our cost base and restructure our debts through a scheme of arrangement where we will now pay our debts over a period of four-and-a-half to five-and-a-half years. This has freed up cash-flows to operate the business normally.
In 2016, we also obtained our permit to export chrome ore, which has allowed us to export high grade chrome ore concentrates, which positively augments our smelting business.
ND: At one point, you had to lay off some workers because of these challenges, what’s the size of your workforce now?
JM: Our direct workforce for both mining and smelting operations is over 700 mainly due to us only running two of our five furnaces.
We also indirectly employ over 3 000 people across our operations, where there is significant outsourcing. We have leased West Plant furnaces to a South African company called Portnex, who are currently running two furnaces.
ND: I understand that apart from the two furnaces, you also do recovery of ferrochrome from the slag dump, how significant is this operation to the business?
JM: Yes, we have a plant, which recovers ferrochrome from the slag dump. It is a profitable process because there is minimal use of electricity since we will be recovering ferrochrome from slag, so it is assisting us to improve our financial position.
ND: Every time the ferrochrome price takes a knock, you are forced to close some of your furnaces, lay off workers and go on a care and maintenance programme, do you have a plan now that will see you remain operational in a profitable manner even when world chrome prices drop?
JM: Our reorganisation and restructuring of the business to a lower cost base over the last few years has placed us in a more robust position to weather the inevitable downturns of the ferrochrome business.
In addition, following the lifting of the chrome ore export ban in 2015, the alternative business line that we now have of exporting high grade chrome ore concentrates assists the more expensive business of smelting.
In addition, the metal recovery processes that we are running also assists our bottom line so we do not envisage shutting down going forward.
As part of continuous improvement, we continue to implement various initiatives aimed at lowering our costs further.
ND: You refer to just running two furnaces, we know you have a five-year deal with Portnex, are you going to extend this leasing deal beyond the five years or you are considering taking over in view of your restructuring deals?
JM: The contract with Portnex is a five-year deal, which expires end of 2020 with an option to renew, so we will assess the situation closer to that date.
ND: There have been complaints raised over pollution especially smoke emissions in Mbizo, and the water released into a stream just directly behind your plant. What are you doing to deal with that?
JM: Zimasco has been operating for many decades in Kwekwe and has always taken issues of health, safety and environment very seriously.
Regarding the stack emissions, the company operates on a strict permit system issued and monitored by the Environmental Management Agency (EMA). Among other requirements of the permits, the company monitors and carries out quarterly emission measurements using EMA approved environmental consultancy companies and submits the results to EMA for constant evaluation.
The company recognises that there is need, in terms of best practice, for pollution abatement to minimise the emissions.
However, this is a very expensive undertaking, which the company has not been able to afford to do to date. We continue to seek funds to carry out this work and it is our hope that it will be done in the near future.
As for water pollution, I am happy to say that Zimasco established a closed water reticulation system and does not release any of its process water into the receiving environment or any water bodies outside our plant.
We have all our plant footprint areas concreted and all dumping areas lined using 1.5mm high-density polyethylene (HDPE) plastic, lined and concreted trenches and pollution control dams (PCDs) handling all our process water, which prevents pollution to the environment.
The company also has a water treatment plant to treat and recycles the process water back into our operations.
This aspect was extensively investigated by EMA (in 2016 and 2017) as well as by various other ministries where it was confirmed that Zimasco’s systems of process water containment and pollution prevention are sound.
We also have a rigorous weekly monitoring programme with samples and results constantly being submitted to EMA, who from time to time visit the company for inspection of facilities and also conduct own monitoring exercises as a check mechanism.
As part of this programme we have drilled 28 ground water monitoring boreholes both inside our plant as well as in nearby communities such as Mbizo to constantly monitor and test for any possible migration of pollution, particularly of chrome VI, into the environment, which I am glad to say show no pollution to any receiving environment.
ND: What is your relationship with the community in Kwekwe like what programmes of corporate social responsibility are you driving?
JM: Our relationship with the community is mutual, friendly and good. Our community understands that we had fallen into hard times and because of that, we could not do significant corporate social responsibility (CSR) activities over the recent past period.
Previously, the company has been involved in numerous (CSR) projects.
We are the biggest company in Kwekwe and as our fortunes have been improving the community is also reaping the benefits and they are quite happy and look forward to our continued success.
The company is currently refurbishing one of the biggest wards (the maternity ward) at the Kwekwe General Hospital.
The project also includes refurbishment of the hospital incinerator, which has not been working for almost a decade and also re-equipping and upgrading the hospital’s laundry facilities.
This is still work in progress and we believe that by end of March or beginning of April 2018, what we have done will be commissioned.
Due to our commitment to corporate social responsibility, the company will, in future continue to scout, identify and implement such CSR projects that will benefit our community.
ND: There have been complaints over your buying traits and that of other miners, who shun local small companies and do direct imports, how are you handling this?
JM: That is an incorrect perception. We support local players in a very big way. After electricity our biggest cost is chrome ore and most of that chrome ore is mined by small-scale miners whom we work with closely in ensuring that they are viable.
In addition, a large portion of general goods and services are supplied by local companies. However, there are some specific items that we have to import because of the technology that is not readily available here.
We are doing quite well in terms of supporting feeder industries into our business.
ND: Your junior workers have at one point accused you of being top heavy, when you retrenched you were accused of targeting the lower levels while systematically ring fencing top management, are you guilty of this.
JM: This is not correct. When we retrenched we retrenched management level as well as lower level employees.
However, there are certain management/skilled positions that must be retained by the organisation irrespective of the level of operations.
Such positions include the likes of geologists, metallurgists etc, whose work continues for the medium and long term viability of the organisation as well as key management in the various divisions.