Following the development, the Zimbabwe Stock Exchange-listed resources group was now pursuing other alternatives.
“the deal could not be consummated as Essar wanted a controlling 51% interest in RioZim. This arrangement would have violated the indigenisation and economic empowerment laws of the country,” Sachikonye said.
He said the Anglo-Australian-backed miner’s ability to develop its Sengwa coal project, among other key investments, now rested on RioZim’s ability to find new investors to undertake the pipeline of projects.
The company, which seeks to raise $40-million through a rights issue, mines gold, diamonds and base metals in Zimbabwe.
Having been given an independent power producer’s licence for its planned 2400MW power station, RioZim needs the money to develop the Midlands project as well as to re-energise other projects.
While Ravi Ruia confirmed Essar’s interesting in bankrolling RioZim in March, Sachikonye’s company said recently that it needed no less than $9-million to revamp the Renco mine.
It also needs cash for new explorations as well as to expand its Cam and Motor gold mine, Darwendale chrome operation and at least $1-million to revamp the Empress nickel refinery.
Essar, meanwhile, has shown its deep pockets and capacity by acquiring a 54% stake in Zimbabwe Iron and Steel Company.
Although the transaction was officially unveiled in March, Industry and Commerce Minister Welshman Ncube said recently that the deal has not yet been finalised owing to four key outstanding issues or conditions.
The demands or guarantees, including an uninterrupted supply of coal, electricity, water and other amenities, have yet to be given by President Robert Mugabe.
Zisco, which has been dormant for about three years now, would get nearly $300-million in fresh capital, while Essar has already started negotiating with the Zimbabwean steelmaker’s external creditors, including KfW Bankengruppe.
The German development bank alone is owed $150-million.
While the company has a potential to produce up to one million tons of steel a year, Zisco had bled over the years due to outright mismanagement and underfunding, which saw its sell-off value plummet to $65-million.
With the Indian firm’s cash, however, its fortunes can improve and authorities say the company’s resuscitation is central to the Zimbabwean economy and industrial revival.