5 July 2012

Zimbabwe: Hwange Colliery Gears for Success

HWANGE Colliery Company will soon sign an off-take agreement with an Indian company, which will see the coal miner export 30 000 tonnes of coking coal a month, chairman Farai Mutamangira said.

Speaking at the company's annual general meeting recently, Mutamangira said to date the group had moved 53 000 tonnes of coal to Maputo with the help of the National Railways of Zimbabwe (NRZ) and South African company Grinrod.

Grinrod was contracted for port space.

Mutamangira said exports were now a main component of the group's growth strategy and would ensure that the company earn US$3 million a month.

The group said it was still looking at various ways of raising capital but talks for the US$180 million facility the group was negotiating with the Development Bank of Southern Africa had not yielded any positive results and had been called off.

Mutamangira, however, said that the group was currently negotiating a US$50 million working capital facility with the PTA bank.

He said the company was in need of capitalisation in order to improve efficiency and boost production volumes.

The group once said it needed up to US$45 million to fully recapitalise thereby bringing production levels to five million tonnes a year.

Full recapitalisation would cost an estimated US$175 million. The company has only been able to access short-term loans which it has been unable to refinance into long-term facilities.

Hwange is bedevilled with ageing equipment, erratic power supply, an inefficient railway system, rising overheads and long term liquidity constraints. Several attempts to tie up with Chinese partners failed to improve the company's lot as losses piled on losses. Lack of spares for the obsolete equipment increased downtime as the company unsuccessfully tried to fabricate its own spares, which proved to be unsustainable.

Hwange Colliery Company has invited bids for wide ranging supply of heavy duty mining equipment, which Mutamangira said had been subscribed to by leading international and local companies. Forty of the bids were now under adjudication.

The extraction industry worldwide has been in a sustained surge since China and the greater Asia became roaring tigers. The insatiable appetite that these countries have been showing; particularly China and India, has resulted in stronger commodity prices and subsequent economic boom in the source countries.

Hwange has the underground capacity to produce 150 000 metric tonnes of coking coal per month, which is in great demand in China, India, Zambia and DRC.

Locally, the mooted resuscitation of Zisco Steel under Essar Global is expected to further boost demand. Prices of coking coal are forecast to increase to more than US$300/t this year. This will be boosted by Asian steel producing giants China and India.

Mutangamira, however, said that the Essar deal for the supply of US$50 million worth of equipment in return for coal had not materialised as it was dependent on the re-start of Ziscosteel.

He said the group had secured US$6,3 million from Zesa in a forward-sale contract for the supply of coal.

Copyright © 2012 Zimbabwe Independent. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.