Essar plans $3.5 billion expansion for Zisco

Essar Group, the Ruias-controlled $15 billion diversified conglomerate, plans to invest $3.5 billion to firm up backward integration for the ailing Zimbabwean steel plant Zisco, which it acquired in March this year.

The massive investment is to develop raw material resources for the 1.2 million tonne steel plant which is currently shut down due to years of cost overruns.

Essar said its African subsidiary, Essar Africa Holdings Ltd, has concluded the transaction with the Zimbabwe government for the plant, which is saddled with $340 million debt.

Under the revival package, Essar Africa will set up two companies — NewZim Steel Pvt Ltd and NewZim Minerals Pvt Ltd. While the former company will deal with direct revival of the steel plant, the latter will develop raw material resources for the plant.

Access to raw materials at reasonable prices is the cornerstone of a profitable steel plant. NewZim Minerals, where Zimbabwe and Essar Africa will hold 20% and 80% stakes, respectively, will be developing Zisco’s mining assets including the Ripple Creek iron ore mine in Redcliff, its limestone deposits and the Mwanesi iron ore deposit.

Depending on feasibility study, Essar Africa will also set up a coal beneficiation project and a 1,000 mw power plant.