Source: The Herald – Breaking news.
Dr John MangudyaHerald Reporters
GOVERNMENT has clarified the funding structure used for the acquisition of shares to gain full control of the country’s largest mining asset, Kuvimba Mining House (KHM), by Mutapa Investment Fund (MIF), Zimbabwe’s sovereign wealth fund.
The acquisition strengthened the Government’s investment in KMH to 100 percent, following the purchase of a 35 percent stake for US$1,9 billion paid for using Treasury Bonds with a tenure of up to 10 years.
The bonds were issued as a loan to the Mutapa Investment Fund.
Previously, Government held a 65 percent stake in the mining giant, whose assets include Freda Rebecca Gold Mine, Shamva Gold Mine, Jena Mines, Sandawana Mine (lithium), Zimbabwe Alloys Limited (chrome), Great Dyke Investments (platinum), and Bindura Nickel Corporation (nickel).
Kuvimba, which falls under MIF, is valued at US$3,2 billion, following an independent evaluation of the company.
In a statement yesterday, MIF chief executive officer Dr John Mangudya said there had been some misinformation on social media regarding the funding structure of the transaction.
“It has come to the attention of Mutapa Investment Fund (MIF) that there are some social media articles circulating with misinformation on the circumstances surrounding the US$1,9 billion, which was used to purchase 35 percent of Kuvimba Mining House (KMH) by the Government of Zimbabwe,” he said.
“Whilst MIF does not normally respond to such articles, we have found it necessary to provide pertinent information on this matter in the public interest.
“For the record, the US$1,9 billion represents Treasury Bonds of a tenure of up to 10 years, which were issued by the Government to purchase 35 percent of KMH.
“The US$1,9 billion of Treasury Bonds were issued as a loan to MIF payable over 10 years with a grace period of three years, commensurate with the tenure of the T-Bonds.”
Dr Mangudya said there was no cash payment on this transaction since the Treasury Bonds were yet to mature.
However, the beauty of the transaction was that MIF gained full control of the asset (KMH) funded from the Treasury Bonds, without making a cash payment.
MIF will now sweat the assets to raise funds needed to repay the long-term loan long before the long-dated Treasury Bonds mature to completely eliminate any fiscal risk associated with the Treasury Bond funding arrangement.
Treasury Bonds are long-dated instruments issued by Treasury to raise resources required to finance key Government obligations.
After the purchase of the 35 percent stake, the Government increased its shareholding in KMH from 65 percent to 100 percent, split amongst MIF 63 percent, Datvest Nominees (former farmers compensation) 12,5 percent, Insurance and Pensions Commission 5 percent, National Venture Company (War Veterans 2,5 percent), Women 2,5 percent and Youth 2,5 percent, Deposit Protection Corporation 5 percent, and the Public Service Commission 7 percent.
Dr Mangudya said the valuation of KMH was carried out by two independent advisory firms, which came up with a median value of US$3,2 billion as of October 31, 2023, driven mainly by growth in the value of platinum, gold and lithium at Sandawana Mines.
“Based on this valuation, the value then of 35 percent of KMH was US$1,1 billion, which was equivalent to the future value of the TBs of US$1,9 billion at a discount rate of 40 percent.
“The purchase of the 35 percent shareholding in KMH strengthened the Government’s shareholding, providing clarity on the KMH share register,” he said.
To reduce the fiscal risk arising from this loan, Mutapa’s strategy is to fully settle the loan from Treasury during the grace period through a variety of structures to be ring-fenced against the assets of Kuvimba, culminating in the shares being cancelled on the back of a share buy-back.
“The structures to settle the loan will include entering into joint ventures and ramping up mineral production, especially gold in view of the current high international price of gold,” said Dr Mangudya.
Mutapa Investment Fund is the sovereign wealth fund of Zimbabwe, established in 2014 by an Act of Parliament, the Sovereign Wealth Fund of Zimbabwe Act [Chapter 22:20].
It was capitalised with the transfer of selected State Owned Enterprises (SOEs) and investments under the Government portfolio in September 2023.
The Fund operates in multiple sectors of the economy that include 30 investee companies and more than 30 subsidiaries of the portfolio companies, namely: mineral resources, energy and trading, ICT, transport and logistics, agriculture and industrials, financial services and real estate.
COMMENTS