* Partner sought to revive moribund steel maker
* Govt rejected initial bids by ArcelorMittal, Jindal Steel
* Prefers medium-sized investors
(Adds details, background)
By Nelson Banya
HARARE, Aug 25 (Reuters) - Zimbabwe has invited new takeover bids for state steel-maker ZISCO, a minister said on Wednesday, following rejection of offers from ArcelorMittal South Africa and India's Jindal Steel and Power.
A power-sharing government formed by bitter rivals President Robert Mugabe and Prime Minister Morgan Tsvangirai has sought to attract foreign investors in a bid to raise at least $10 billion to fix the economy.
The government has identified cash-starved ZISCO, once a major foreign currency earner with the capacity to produce 1 million tonnes of steel per year, as the first state-owned enterprise to be disposed of in a bid to revive its operations.
"The ministry wishes to advise interested parties that bids for a strategic partner for ZISCO are now open," Industry and Commerce Minister Welshman Ncube said in a statement.
"Completed offers must reach the ministry on 24 September 2010."
Ncube was not immediately available to comment on whether firms that had previously bid for ZISCO would be allowed to do so again in a bidding process expected to take place over three months.
In May, Ncube announced that Mugabe had thrown out bids by the ArcelorMittal unit and by Jindal Steel, which had been shortlisted for the ZISCO stake, saying they were too big and that Zimbabwe preferred medium-sized investors for the company.
ZISCO operations have been grounded since the height of Zimbabwe's economic meltdown in 2008, and analysts say it would need a big investor to help offset its $300 million debt.
Analysts say Zimbabwe has struggled to attract significant investment, even though the unity government has brought economic stability, because of ongoing wrangles within the coalition and an empowerment law that aims to localise control of all foreign firms.
The government has, however, said ZISCO's privatisation would not be affected by the controversial law, which compels foreign investors to sell 51 percent stakes to local blacks. (Editing by Jane Baird)