Fidelity disposal deal hangs in the balance
GOVERNMENT’S plans to dispose of its controlling stake in the country’s sole gold buyer Fidelity Gold Refinery (FGR) is under scrutiny by some gold producing firms shortlisted for the US$49 million transaction, the Zimbabwe Independent can reveal.
The gold buyer was offered to seven private entities that include Kuvimba Mining House.
Major gold producers included in the deal see red flags in the involvement of some companies in the deal.
“It has taken a long time in order for us to complete the due diligence on all the possible investors.
“Yes indeed, Fidelity is a good investment. The value of the US$49 million was determined by reputable external auditors who carried out the valuation of FPR,” he said yesterday.
But sources close to a series of meetings between authorities and the seven shortlisted players told the Independent this week that leading gold producing firms RioZim and Caledonia were hesitant to partner some of the potential suitors vying for Fidelity.
As first reported by the Independent on August 20, 2021, government, at that time had selected Kuvimba Mining House, Better Brands, RioZim, Caledonia, Pan-Africa Mining, Zimbabwe Miners Federation (ZMF) and Yellow Credit as prospective new private shareholders at the country’s sole gold buyer.
During a series of meetings facilitated by authorities to bring together the shortlisted private players, sources said, questions arose around the suitability of Kuvimba Mining House, Better Brands and ZMF.
It also emerged that there were concerns that Fidelity, at US$80 million, was overvalued. Suitors consider it too old and its equipment outmoded to be worth that much. They also see its lack of a London Bullion Marketers Association certification as a liability.
Kuvimba, which until last year did not exist, has struggled to offer satisfactory answers on its shareholding structure. But it is now on the cusp of becoming the country’s largest gold producer after embarking on an acquisition spree of lucrative gold assets around the country.
It has, in its short existence acquired Shamva Mine, Freda Rebecca and mines held by Zimbabwe Mining Development Corporation (ZMDC), namely Elvington, Jena, Golden Kopje.
Government has claimed 65% ownership of the entity but has dithered in disclosing the owner of the remaining 35%, sparking questions on the Fidelity arrangement.
According to Finance minister Mthuli Ncube and Kuvimba’s former chief executive David Brown, government owns 65% of Kuvimba’s shares, while the remaining 35% equity is held by Ziwa Investments, a Zimbabwean subsidiary of the Mauritius-registered Quorus Management Services.
Kuvimba’s maze of structures and web of intricate offshore entities has not been disclosed.
Notably, Kuvimba’s relationships with Sotic International, Almas Global Opportunity Fund – allegedly used by local businessman Kudakwashe Tagwirei to invest in Sotic via the Cayman Islands – and Quorus have not been disclosed.
Almas owns 65% of Ziwa Resources while the remainder is owned by Zimbabwe-registered Pfimbi Resources, whose directors are Tagwirei and his wife. Tagwirei is on US sanctions over his alleged abuse of public funds.
Sources, in multiple briefings, said the credentials and status of Kuvimba, among other key concerns, was “of grave concern to other gold producing firms who were shortlisted to take over Fidelity.”
“In meetings with the governor of the central bank John Mangudya, it appears that there has been virtually no movement around the deal largely as a result of the involvement of Kuvimba and Better Brands,” the source said on condition of anonymity.
“The ownership of a gold exporting entity is important. If that entity is owned by someone who is sanctioned, it becomes increasingly difficult to do business.
“Ownership of Fidelity is important and the proposed transaction should serve as a conduit to the international market.
“Fidelity is also not licensed by the London Bullion Market Association,” the source added.
Relating to ZMF, its president Henrietta Rushwaya was last year arrested at the Robert Mugabe International Airport while allegedly attempting to smuggle a 6kg gold worth US$366 000 to Dubai.
Rushwaya’s former driver and staffer at ZMF, Tashinga Masinire, was also arrested in South Africa in 2021 with a bullion contraband worth US$780 000.
Sources close to negotiations to seal the Fidelity privatisation deal added that the involvement of ZMF and its image further rattled the key gold buying firms which wanted to conduct business in a transparent manner.
“During the matchmaking meetings and internal discussions, the key gold producing firms also raised questions on the suitability of ZMF. Basically they do not want to be associated with characters who have been accused of smuggling gold. They want to keep their distance,” the source said.
When contacted for comment, Rushwaya refuted the claims as unfounded.
Better Brands, owned by businessman Pedzai Sakupwanya, which is also vying for a seat among the shortlisted private shareholders, was also a “turn off” for the large-scale gold producing firms angling to take over Fidelity.
Sakupwanya has trended on social media platforms, flaunting gold bars and wads of United States dollars.
According to the firm’s website, Sakupwanya is Better Brands “founder and director” who “is a pro-active businessman, entrepreneur, who takes cognisance of the community requirements and is the duly nominated and elected (Zanu PF) DCC (District Coordinating Committee) Zone chairperson and shadow councillor for Goromonzi Ward 21”.
In February last year, Sakupwanya, who is widely known as “Scott”, found himself in the eye of a storm after his company allegedly grabbed 132 gold mining blocks from Redwing Mine in Penhalonga.
“Some of the characters making up the cast of shortlisted candidates will not wet the appetite of a firm that aims to conduct business openly,” another source close to the ongoing negotiations told the Independent.
Sakupwanya did not respond to questions sent to him via WhatsApp.
Investigations by the Independent last year revealed that a company called Yellow Credit was also interested in snapping a stake in Fidelity. However, efforts to uncover the beneficial owners of the entity drew blanks, as its registration records at the Company’s Registry could not be found.
A company chaired by former Chamber of Mines president Victor Gapare, called Pan-African Mining (PAM), is also among the potential new shareholders at FPR. PAM operates the Aryshire and Muriel gold mines in Mashonaland West.
Questions sent to Rio Zim and Caledonia had not drawn any responses at the time of going to print.
When the Independent disclosed the identities of the private players vying to take over Fidelity, Mangudya declined to name the candidates, saying that would be done after completion of the due diligence exercise running for six months.
“Identity of the entities that have shown interest to purchase stake in Fidelity Printers and Refiners (FPR) are from the primary gold producers, the association of the small-scale gold producers and the FPR buying agents. Their names will be released at the closure of the offer in six months’ time,” Mangudya said at the time.
“The due diligence on those that have shown interest to acquire shares in FPR is ongoing to ensure transparency, adherence to international best practice and to provide ample time to the would-be new shareholders to also carry out their own due diligence on the transaction,” he said, adding that the valuation of FPR was carried out by Grant Thornton before the central bank resolved to unbundle 60% of FPR.
The deal is worth US$49 million, which is the 60% stake the government intends to offload to private players.