Essar to Venture into Coal Mining

Indian conglomerate Essar Holdings has begun negotiations with holders of Hwange Coal Concessions with a view to establishing joint ventures to extract the mineral to power its planned 600-megawatt thermal power station in Zimbabwe, says sources.

In 2010, Essar agreed to buy 54 percent of Ziscosteel, now NewZim Steel, in a deal initially worth $750 million, but the deal ran into problems over mineral rights that were to be given to the company's subsidiary, NewZim Minerals.

The multi-million dollar deal from NewZim Steel's revival however, has become more likely as the government and Essar agreed to immediately operationalise the firm.

NewZim Steel would resume production within two years and $650 million would be spent under phase one to restart production at 500,000 tonnes per annum.

The company wants to build a 600MW power plant to supply electricity to NewZim Steel, with excess being sold to national power utility Zesa Holdings. NewZim Steel is expected to consume 300MW.

According to sources familiar with the negotiations, Essar is not convinced Hwange Colliery has capacity to supply the coal required for the plant. As such they are engaging other concession holders to cover the potential deficit.

The move by Essar will bring more activity around the mining district where some companies own large - but idle - coal claims. Another notable in the Essar deal are plans to refurbish the rail transportation system.

The arrangement will see the refurbishment of the Hwange-Kwekwe rail link as well as construction of a railway line between Chivhu and Beira.