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. Herald
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