Financial Gazette (Harare)
Dumisani Ndlela
27 September 2008
Harare — HWANGE Colliery Company (HCC) has announced plans for a major recapitalisation drive this year, raising questions over whether the coal miner will ask shareholders for additional cash or seek offshore funding.
In its announcement to shareholders, which was part of a briefing on financial results for the six months to June 30, 2008, Hwange's board said the company was pursuing the recapitalisation programme to be implemented before year-end "as a permanent solution to operational bottlenecks".
The company's operations have been hamstrung by antiquated machinery, which has stifled output and resulted in the domestic market being grossly undersupplied with coal.
Management said there was a planned acquisition of a coal fines recovery plant from South Africa, but indicated that alternatives were being pursued in China.
This suggested the delivery of the plant from South Africa was in doubt either because of non-payment or lack of credit to facilitate the purchase.
The Hwange board said the recapitalisation "would significantly boost production and the company would be able to achieve sustainable production output that would increase the company's market share".
"The demand for coal and coke products is expected to remain firm in both the domestic and export markets," it said.
Apparently, Hwange's previous recapitalisation programme faced hurdles after a major shareholder said it did not make sense to solicit additional capital from shareholders in Zimbabwe dollars when the company wanted to raise the money for offshore procurements, which required foreign currency.
Although the shareholder had undertaken to guarantee Hwange's capital raising initiative offshore, it is not clear how that initiative collapsed.
However, it was reported by The Financial Gazette in July this year that the coal mining company, in which government has a significant shareholding, had concluded a US$6 million deal with Hethimex Boulevard du Souverain of Belgium to fund the recapitalisation programme.
Executives from Hethimex had visited Zimbabwe in June to iron out details of the funding, which is understood to be a revolving loan facility.
Hwange is expected to use the cash from this deal to fund its open-cast mining operations.
Under the agreement consummated on June 28,Hwange unconditionally granted Hethimex exclusive rights to collect its revenue from coke and coal exports direct from its customers should it default on loan repayments.
As part of the deal, Hwange would deposit into Hethimex's Brussels account three consecutive payments of US$300 000.
The Brussels courts would be used to resolve any disputes arising from any breach of the agreement in accordance with the laws of Belgium.
Last year Hwange, which is listed in Zimbabwe, South Africa and the UK, was forced to grant business magnate Billy Rautenbach's mining company, CAMEC, a contract to extract coal on its behalf in order to meet the high demand for coal.
The current power blackouts experienced across Zimbabwe have also been linked to the failure by HCC to rump up coal production.
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