𝐖𝐀𝐒 𝐊𝐔𝐕𝐈𝐌𝐁𝐀 $𝟏.𝟔 𝐁𝐈𝐋𝐋𝐈𝐎𝐍 𝐃𝐄𝐀𝐋 𝐀 𝐁𝐀𝐃 𝐃𝐄𝐀𝐋?

Kuvimba Mining Investment Company a gem in the Zimbabwe Mutapa Fund

Kuvimba Mining House is a mining investment company in which the Zimbabwean government owned 65% as the custodian of Zimbabwe's mineral resources. For capital, cash-flush investors, including Kuda Tagwirei, owned 35% in this public-private partnership created to control Zimbabwe's mineral resources and drive the country's mining industry.

It’s important at this point to remember that by virtue of Kuvimba having investors like Kuda, whose Sakunda has been the biggest company in Zimbabwe by revenue, from providing the bulk of Zimbabwe’s fuel and controlling the Beira oil pipeline, Kuvimba was very liquid.

As a result of US sanctions on Zimbabwe over the past 23 years, many mining companies found it difficult to do business. The business environment became worse after Executive Order #EO13469 in 2008, which made it difficult to sell resources on the global market, receive payments from exports due to the US blocking MMCZ payments, and access to loans, as sanctions prohibited investment in Zimbabwe.

Due to these market conditions, Kuvimba founders realized an opportunity to buy Zimbabwean mines and mineral rights at a time when nobody wanted to invest in the country and when mining companies were collapsing due to sanctions.

With many mining businesses struggling to survive, in 2020, the environment was conducive for Kuvimba to go on a $1 billion spending spree, acquiring cheap mining assets, many of which were sitting on huge mineral reserves and had existing mining infrastructure.

When they bought these mines, many of them were just in need of operating capital, and once capital was injected, they became very profitable, which in turn blew up their valuation.

Let’s take for example, Bindura Nickel, which Kuvimba paid $29 million for, to a bankrupt British ASA Resource Group that was struggling to recoup profits and recapitalize the mine because of not just US sanctions but UK and EU sanctions which made it difficult for the Britons to raise funds at home.

This mine sits on one of the world's biggest nickel reserves, meaning that this mine is a cash-cow that just needed to be capitalized. Now that sanctions are gone, the valuation of this mine has shot up, making it a very lucrative proposition for investors.

In 2020, Kuvimba bought Fredra Rebecca for $40 million from Mzi Khumalo. Initially, Mzi asked for $25 million, but once Kuvimba had done its due diligence, someone warned Mzi that Kuvimba would be willing to offer more because the assessment had been positive, so he asked for $40 million.

Kuvimba was willing to give Mzi even more because Fredra sits on over 2.4 million tons of gold. Since production began under the new management, the mine is producing no less than 300 kgs of gold per month, meaning that at today’s prices, it’s producing over $190 million in revenue and will do so for the next 1,000 years.

Kuvimba then went on to buy the chrome producer, Zim Alloys, for a song, after it went into administration in 2013 due to a lack of access to capital, machines, tools, and markets due to sanctions. Since Kuvimba bought the concern, it has invested $40 million to get the mine and smelter going again.

Other companies acquired include Great Dyke Investments, which holds over $30 billion in proven platinum reserves in the Great Dyke, and then there is the gem, ZISCO Steel.

Now, besides the revenues these companies make every year, the genius in the Mutapa Fund’s acquisition of Kuvimba is that our Sovereign Wealth Fund is more interested in the huge mineral reserves that these companies are sitting on underground.

So, for example, Fredra is sitting on 2.4 million tons of gold, Great Dyke Investments over $30 billion in platinum, Zisco Steel’s BIMCO holds over 3 billion tons of iron ore -some in Manhize- over 100 million tons of limestone, and over 1 billion in coking coal.

This is over $1 trillion of assets. So was $1.6 billion Mutapa Fund deal a bad deal?

Written by Rutendo Matinyarare, Clairman of ZASM.