Finance Minister Mthuli Ncube has told Parliament that government’s US$4.5 billion valuation of Kuvimba Mining House is justified.
The government loaned the Mutapa Investment Fund US$1.6 billion to buy a 35% stake in Kuvimba. That transaction implies a US$4.5 billion valuation for the mining company. The 35% stake was reportedly held by a “management consortium”, but no disclosures have been made. Kuvimba was formed from government mining assets and mining operations previously held by businessman Kuda Tagwirei.
In Parliament on Wednesday, Ncube responded to a question from MP Corban Madzivanyika (CCC, Mbizo), who wanted to know if the widely reported US$4.5 billion valuation of Kuvimba was valid.
Ncube responded: “That is the valuation that Mutapa was able to furnish us with when they did their transaction for the 35% equity. This valuation is backed by the assets that are within that group, which range from the platinum, lithium, gold assets and so forth. There is quite a variety of minerals in there, subsidiaries and the value came up to about US$4.5 billion which then is in line with what Mutapa paid off the shareholders of that 35% and acquired 100% of the equity in Kuvimba.”
Ncube says government will get the money back when Mutapa sells off any assets.
“There is a loan agreement regarding the loan agreement between the Central Government through the Treasury and Mutapa regarding the capitalisation of Mutapa and Mutapa has to pay back that loan. The loan arrangement says that any sale of assets by Mutapa ought to go towards extinguishing that loan as a priority,” Ncube says.
However, the US$4.5 billion valuation is substantially higher than the US$1.2 billion valuation that government publicly estimated for the company two years ago.
What are these assets?
Neither Mutapa nor Kuvimba has made public a complete resource estimate of the mining company’s assets to allow a fair public appraisal of its valuation.
Freda Rebecca Mine is the biggest of Kuvimba’s operations, and expects output of 75,000 ounces this year. Kuvimba also owns Shamva mine, for which it is seeking US$150 million from investors. It also runs Jena Mine, previously owned by the state-owned ZMDC, and is redeveloping five other mothballed operations. Operations at Bindura Nickel Mine are currently suspended, due to a crash in nickel prices and plant breakdowns. Kuvimba’s biggest new prospect is Sandawana, which the company believes will be Zimbabwe’s largest lithium mine. The company bases this on preliminary mineral resource estimates and the grade from stockpiled ore.
Questions, questions
There is yet to be a full assessment of what mineral Kuvimba holds and what it is all worth. Since Kuvimba is now 100% publicly held, MPs may need to push for a full asset evaluation.
Crucially, Ncube has also not explained to Parliament why the government needed to use public funds to buy the stake in the first place. Government may have believed that it was necessary to buy out the “mystery shareholders” so that Kuvimba would have a clean slate and not face questions on minority shareholders from potential partners. However, the public deserves full disclosures on how the valuation was done, and who the seller was.
How would Kuvimba compare?
To see why there are questions over the valuation, one needs to look at the market capitalisation of other large-scale mining operations in the region. The government’s Kuvimba valuation would make the bigger than Impala Platinum, the world’s second-largest platinum producer, currently valued at US$3.7 billion. Kuvimba would also beat other mining giants such as Sibanye Stillwater and Patrice Motsepe’s African Rainbow Minerals. The government valuation also puts Kuvimba almost at par with Harmony Gold, South Africa’s biggest gold producer by volume. – (NewZWire)
