ZIMASCO, Portnex dispute set for arbitration
A dispute between Zimbabwe’s biggest integrated ferrochrome producer, ZIMASCO and South African firm Portnex International is set to be resolved through an arbitration process, Business Times can report.
The dispute emanated from lease agreement debts running into millions of United States dollars.
Portnex and ZIMASCO, which operates furnaces in Kwekwe, chrome ore claims in Shurugwi, Guinea Fowl, Lalapanzi and Mutorashanga, entered into a five-year US$12m lease deal, which saw the South African firmoperating ZIMASCO’s Western plant in Kwekwe.
In addition to leasing furnaces, ZIMASCO also provided Portnex with support services on a cost recovery basis.
The support services include laboratory, weighing, sizing and crushing, transport, security, and secondary metal recovery.
Also, ZIMASCO, allowed its mining contractors to supply chrome ores from ZIMASCO’s claims to Portnex’s Western plant furnaces.
However, the lease deal expired last year, resulting in ZIMASCO reclaiming its Western Plant operations.
In fact, Portnex stopped operating the plant in 2019, citing operational challenges, before its lease expired in December 2020.
Consequently, there have been disagreements on the amount that Portnex owes ZIMASCO.
Well-placed sources at ZIMASCO told Business Times that a private arbitrator is set to be appointed to resolve the matter.
“There is a continued disagreement on how much Portnex owes Zimasco considering that some of the debts were accrued when the exchange rate was at 1:1. The matter had to be submitted before the courts for arbitration,” one source at ZIMASCO told Business Times.
It is understood that Portnex had intentions to purchase ZIMASCO’s three furnaces at Western plant.
But, due to the acrimonious relationship that existed between the two parties, Zimasco has decided to take back control over its Western operations after the expiry of the lease agreement.
There have also been disputes over the company’s alleged failure to pay rentals to ZIMASCO.
At one time ZIMASCO accused Portnex of having failed to fulfil its obligations under a lease agreement.
Portnex, on the other hand, had felt cheated saying ZIMASCO did not disclose that the company was heading for judicial management, under Reggie Saruchera of Grant Thornton after its indebtedness to banks and creditors shot up to about US$65m in 2015 from US$38m in 2009.
Consequently, ZIMASCO stopped operations in 2015 leading to the switching off of its furnaces at the Kwekwe refinery.
Three of its furnaces were, however, leased to Portnex in a US$12m lease agreement.
In 2018, ZIMASCO however exited from receivership in 2018 after posting a US$160m in turnover and a profit of US$45m.
At one time, the plant had to be shut down after Portnex failed to settle electricity power obligations.
Portnex took the case to the courts.
ZIMASCO is a unit of China’s Sinosteel Corporation.