HWANGE Colliery Company has sealed a US$22 million supply credit deal with a Chinese mining equipment company Norinco, chairman Mr Farai Mutamangira has said. This follows an invitation of bids by the coal mining giant in April this year for supply of a wide range of equipment after the company failed to raise funds for recapitalisation. Under the supply credit arrangement, Hwange intends to acquire equipment worth US$40 million for underground and open cast mines and for a coal preparation plant.

Hwange will make a down payment of US$6,6 million to Norinco before the end of this month with equipment deliveries expected during the first quarter next year.

The equipment include caterpillars, bulldozers, excavators, fire tender vehicles and dump trucks. After commissioning, production is expected to double to 450 000 tonnes per month.

"It is quite difficult to access long term loans due to liquidity challenges but we have successfully leveraged on supply credits.

"This is a positive development for the company and the whole nation at large. We will be able to double our production to about 450 000 tonnes per month," said Mr Mutamangira in an interview.

He added that this was in line with Hwange's board overall thrust to ensure the company is fully recapitalised. Over the past two years, Hwange has been pursuing a loan from the Development Bank of Southern African but was unsuccessful.

"That was a big challenge for the board and the management as well and we had to be innovative, and that is the reason why we opted for credit supply arrangements. The equipment from Norinco will take the mine to its designed capacity," he added.

Mr Mutamangira, Hwange acting managing director Stanford Ndlovu and company secretary Tembelani Ncube were in China last week where the deal was sealed.

Asked if Hwange will be able to raise the deposit on time, the chairman said "certainly."

Meanwhile electricity supplies are set to improve after Hwange recently commissioned equipment worth US$6,3 million which will result in uninterrupted supplies of coal to small thermal power stations in Harare, Munyati and Bulawayo.

Hwange, which has an installed capacity to produce five million tonnes of coal per year, has been operating below capacity due to dependence on old equipment.It requires more than US$175 million for recapitalisation.

About 12 years ago Hwange Colliery Company produced about five million tonnes of coal and related products annually, before production fell by 50 percent between 2000 and 2009 during the time when Zimbabwe's economy contracted by more than 40 percent.

The business relations between Hwange and Norinco are not new, as the leading Chinese mining company previously supplied the Colliery with mining equipment.