Zibagwe $200 million investment fact or fiction?

via Zibagwe $200 million investment fact or fiction? – NewsDay Zimbabwe March 18, 2015 by Blessed Mhlanga

Mines minister Walter Chidhakwa said he thought Vice President Emmerson Mnangagwa had been trapped in an embarrassing situation similar to the Chinhoyi diesel fiasco when he introduced the African Chrome Fields (ACF) project in Cabinet.

In 2007, a traditional healer, Rotina Mavhunga, made fools of Cabinet ministers when she made them believe she could conjure pure diesel to pour out of a rock and bring the country’s fuel problems to an end.

Mnangagwa facilitated AFC project without the knowledge of Chidhakwa. By his own admission, the Mines minister first heard of the venture in Cabinet. Chidhakwa later dispatched a team from the ministry to verify the claims.

ACF, which is owned by non-listed South African company Moti Holdings, announced that it would be sinking over $200 million into a project that is expected to produce around 10 000 tonnes of ultra-low carbon ferro chrome per month in the next 11 months.

Moti Holdings, according to Africa Mining, bought ACF for $3 million with $1 million only having paid in 2014 after ACF secured an environmental permit for the Zibagwe project.

The company has already started operations in Chinyika Ranch some 68km outside Kwekwe using new technology to smelt the chrome called the Exothermic (Alluminathemic) process.

Exothermic means the ore produces its own heat sufficient to melt the chrome and separate it from slag in less than seven minutes.

After lighting the chrome ore fines with a gas torch, temperatures soar to nearly 3 000 degrees in less than five minutes and die down naturally in two minutes. After cooling down, ultra-low carbon ferro chrome and a by-product alumina slag are also harvested ready for the market.

It is this process which made Chidhakwa think while in Cabinet that Mnangagwa was falling into the same trap as fired former Zanu PF secretary for administration Didymus Mutasa.

Mutasa and other ministers that include Sydney Sekeramayi (Defence), Kembo Mohadi (Home Affairs) and the late Nelson Samkange (former Mashonaland West provincial governor) climbed Maningwa Hills in Chinhoyi barefooted after being misled into believing that pure diesel could ooze from a rock by Mavhunga.

“I honestly thought that the Vice-President was following in the footsteps of Mutasa when he came to Cabinet with the proposal from AFC,” Chidhakwa said as thousands including President Robert Mugabe gathered at the ranch to witness the demonstration recently.

Mugabe also told his supporters that he thought his VP was misleading him and was therefore eager to see the project for himself before commenting.

“I thought he was lying when he spoke about it in Cabinet and I said to myself why is he misleading his friend? This is why I flew here to witness it for myself,” he said.

AFC technology has the capacity to produce ultra-low carbon ferrochrome in less than five minutes without using electricity to smelt the ore.

The process normally takes six hours in the conventional furnaces similar to those operated by largest chrome smelting company Zimasco and uses high voltage electricity.

Midlands provincial mining engineer Noel Pasikwavaviri who was part of the team dispatched by the Mines ministry to verify the claims by AFC said the process was amazing.

“The normal process which we are used to produces results in over six hours and at huge cost, but what we have seen here is amazing.
Not only does it produce high quality chrome in less than 7 minutes, but the product fetches more than three times the charge chrome produced by companies like Zimasco,” he said.

Ultra-low carbon ferrochrome according to company chief executive office Zunaid Moti, fetches $2,85 per pound on the metals market while charge chrome produced in more than six hours fetches just $0,85.

Business is always sceptical when such figures are thrown around, investment in the middle of nowhere for over $200 million, which will result in the employment of over 600 direct employees and production of 10 000 tonnes of chrome every month.

Chirumanzu-Zibagwe constituency which stretches for over 300km had over 18 000 voters casting their votes in favour of Mnangagwa in 2013.

Most of these people are poor peasant farmers who were relocated on the vast tracts of ranching land owned by white former farmers.
Instead of ranching, most of these voters have attempted farming in this dry arid land and with poor rains this season most face hunger if aid does not reach them.

AFC could therefore be exactly what the doctor ordered if it really takes off the ground and delivers its promises which include erecting infrastructure for its workers such as housing, shopping centres and leisure deep in the bushes of Chief Samambwa’s chiefdom.

Ronald Nyauchi who was part of the thousands gathered at the ranch is looking at the AFC investment as a panacea to the problems not only in ward 2 Zibagwe but the whole constituency.

“I am hoping that I will get a job here. This is the reason I am excited about this company opening shop in my area. Farming is not really giving us hope especially given the erratic rains and lack of capital. It looks like our Gods have smiled at us this time around,” he said.

However, a number of business players who preferred not to be named for fear of being targeted by Zanu PF functionaries who are riding on the investment as a major breakthrough, said work on the ground did not point to serious investment.

“I have not seen any indication that this is a long-term investment, honestly a company that claims it will sink $200 million in this area is yet to build a proper office or just simple housing for its staff,” said one engineer who refused to be named.

Those who have doubts could be justified because the investment comes at a time there has been capital flight from the Zimbabwean money markets owing to unclear policies by government especially the indigenisation laws making sceptics doubt if this will be a long-term investment.

Moti Group of companies bought AFC from an Australian-based mining services provider who were mining raw chrome ore and exporting it without adding any value.

Pasikwavaviri said the Australians abandoned the project when government banned the exports of chrome ore.

Currently with a staff of 20 locals under its employment, AFC is smelting its chrome in two steel pots the size of drums.

They have only invested in one washing plant which crushes chrome ore into fines before they are smelted in the pots.

According to Moti, the company will sink seven more washing plants with a capacity of crushing 30 000 tonnes of ore per month.

A plant will also be built which will be used to smelt the chrome as opposed to the “African drums” currently used by the company.

Mugabe who flew from Harare to witness the project pledged that his government would do anything to facilitate its success in line with the economic blueprint, Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset).

Mugabe was, however, silent on the indigenisation policy during his two-hour-long-speech in which he spoke more about his enemies than the project.

Zimbabwean law demands that locals should own at least 51% of any foreign-owned company with a net asset value of at least
$200 000.

Moti told Mugabe that the exothermic way of smelting chrome ore was exclusive to the project in Zimbabwe and to his political company.
Pasikwavaviri says it could take over 50 years for AFC to exhaust the chrome reserves which are at their disposal at the ranch which sits directly on top of the mineral-rich Great Dyke.

“I am hopeful that this is going to be a long-term investment because from the projections we have made it is going to be a profitable venture and chrome ore resources will last for more than 50 years,” he said.

No independent survey of the area to determine the exact chrome ore deposits lying in the belly of the ranch, according to the Mines ministry, has been done.

“AFC has said in the next three years they will have completed topographic mapping and exploration of their claims and determined exact quantities of deposits which await them,” Paskwavaviri said.
Speaking during the demonstration of how the process works, Moti said the company can actually recover costs by selling alumina slag which is left after the chrome is processed.

The slag, he said, is used as furnace lining material and is of high quality fetching high prices on the market sufficient to ensure that AFC recovers its operating costs on the byproduct.
Moti Holdings owns South African Ferrochrome Furnaces headed by Zunaid Moti which produces nearly 200 000 tonnes of ultra-low carbon ferrochrome annually.

This metal is used in the manufacture of stainless steel and has a niche market in the aviation industry.

Charge chrome is, however, not normally used in aviation industry, but mostly for reinforcement in skyscrapers and other building projects.

Information that is not yet available is about the side effects if any on the environment of this new method of chrome smelting.
That Zimbabwe is the only country blessed by this technology which has not been used in South Africa where Moti have a bigger operation could be a telling sign for the future.

Mugabe says the investment was in line with ZimAsset, so is the distribution of computers in rural schools which do not have electricity and computer-literate teachers.

It therefore becomes difficult to understand what ZimAsset stands for, but whatever the case, Mnangagwa, who is playing a leading role in this project, has scored a big success in bringing such a huge investment in rural Zibagwe.