6 July 2014

Zimbabwe: Hwange Spends U.S $33 Million On Equipment

HWANGE Colliery Company Limited (HCCL) has acquired equipment worth over US$33 million to improve production to around 300,000 tonnes a month and plans to divide operations into units as the struggling miner manoeuvres to return to the black.

In the year ending December 2013, Hwange suffered a US$31.6 million loss, down from a US$3.0 million profit the previous year. By close of the year, HCCL's current liabilities stood at 162 million USD, far outstripping its assets at US$85 million.

Newly appointed managing director Thomas Makore told journalists after the company's annual general meeting that Hwange, which is struggling with legacy and current debt, was currently mining on average 150,000 tonnes a month.

"The equipment is coming from Belarus and India between September and October," he said. "The equipment will allow us to produce coal quantities at targets that we have set ourselves."

The Zimbabwe Stock Exchange-listed firm is struggling to raise funding for its recapitalisation programme as a result of its 50 million USD legacy debt which is blocking its access to fresh capital.

Makore said the firm had turned to development financial institutions such as PTA Bank for funding as local commercial banks viewed it as a "risky investment."

"The acquisitions are being made through a vendor financing agreement," he said.

In the last two years, Hwange has repaid around US$35 million of the legacy debt but operational challenges have seen the coal miner accruing more debt through failure to pay workers and creditors for months, which has resulted in the latter dragging HCCL to court.

The miner owes workers US$19 million in unpaid salaries and 13 million USD to other creditors most of whom are equipment suppliers. "We accept our obligations and are trying to negotiate payment plans," Makore said.

He added that as part of HCCL's re-organisation, the company will be divided into around five units which include plant and equipment, open cast mining as well as underground mining.

"That way, we can better manage the company as we can be able to monitor and track the costs and performance," he said. "We are mapping a clear road forward that should allow us to become sustainable."

Hwange, which employs 3,200 people, had earlier announced plans to retrench over a third of its workforce to rationalise the workforce, but the government, which is the major shareholder, blocked the move.

Meanwhile, Makore said Mota Engil, the Portuguese company contracted to mine coal on behalf of Hwange, had not yet commenced operations which impacted on the company's 2014 first quarter performance.

"We had planned that a contract miner augments our production but there are delays in terms of that," he said, without giving the reasons for the deferral.

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