HWANGE Colliery Company Ltd (HCCL) will have to pay two South African companies it contracted to repair its oven battery with coke valued at US$4 million due to financial problems.
Under the deal, Hwange Colliery will pay Force Bell and Otto Simon and Fosbel companies for repairing its 32-coke oven battery, after it starts working and producing the coke.
Hwange Colliery public relations manager, Burzil Dube confirmed that they were using coal as payment for the repair of the oven battery but could not go into more details about the transaction
"Due to the financial constraints we made arrangements to pay the companies rebuilding the battery with coke, it is nothing unusual. We have paid other services with coal before," he said.
"The 32-coke oven battery is currently under corrective maintenance as it was due for a major rebuild and a team of experts from the United Kingdom and South Africa have been brought in who are expected to give it another life of between five to ten years. About US$4 million is needed to repair the battery."
Coke is a solid carbonaceous residue derived from low-ash, low-sulfur bituminous coal from which the volatile constituents are driven off by baking in an oven without oxygen at temperatures as high as 1 000 Â°C so that the fixed carbon and residual ash are fused together.
Metallurgical coke is used as a fuel and as a reducing agent in smelting iron ore in a blast furnace. The product is too rich in dissolved carbon and must be treated further to make steel.
Coke from coal is grey, hard, and porous and has a heating value of US$24,8 million. Some coke making processes produce valuable by-products that include coal tar, ammonia, light oils and coal gas.
"The battery is currently on a two-month shut down window period and during this phase significant revenue will be lost hence some employees including management will be paid two weeks wages as part of efforts of cash conservation and cost management," Dube said.
Management at Hwange said the battery had been down for six weeks.
"The battery had not been working for a year. It only started working again end of November last year but broke down after three months. We are having to rely on the Hwange Gasification which was built and is being run by Chinese nationals," a Hwange Colliery official said.
The colliery company has 25% shareholding under a Build Operate and Transfer process in Hwange Coal Gasification Company.
The official said: "They are expensive but doing a good job. Their payment (in coke) might start end of May or early June since the battery will be repaired for nearly three months."
The breakdown of the Oven battery has forced Hwange Colliery to introduce a short working month for its workers across the board because of the financial challenges.
Workers are being paid for the two weeks they report for duty in a month.
Insiders at the company said while the coal miner had reduced working days for its 3 000 workers, it had hired eleven contractors from South Africa who where being paid US$50 per hour.
Hwange Colliery has three operational mines namely JKL Opencast (widely known as the dragline pit), Chaba Opencast and 3 Main underground Mine. The coal reserves at the dragline pit are expected to have depleted within the next two years while those at Chaba and 3 Main in will last for 17 years.
"We are currently operating at 60% of our capacity which is also subject to our customers' demand," Dube said.
According to documents a company called Colbro had been given a contract to transport coal for Hwange at a cost US2,97c/ tonnes, while other companies such as Clidder was offering the same services at US$1,80c. The deal was "temporarily stopped after the 32-coke oven battery broke down.
Documents seen by businessdigest show that the company recently acquired six-40 tonne dump trucks and two excavators on credit facility at a cost of US$5 million.
The debt is currently being serviced at a cost of about US$800 000 per month.
"The colliery company's business plan is to diversify and also to intensify export penetration, increase in volumes, and responsible corporate citizen among others," Dube told businessdigest.
"This can be achieved through effective planning of operational skills while on the other hand seeking top improve on our logistics," he said
Dube said the company was currently into coal bed methane gas and investigative work with a leading international firm was already in progress. Applications for multi million dollar projects have already been submitted to the relevant authorities.
"Most of the projects currently being done at the mine are financed through the company's own resources while negotiations are at an advanced stage with some regional financial institutions," Dube said.