16 April 2018

Zimbabwe: Hwange Colliery Eyes DRC, SA, Zambia Markets

Struggling coal producer, Hwange Colliery Company Limited, is eyeing regional markets to widen its revenue streams and earn foreign currency.

Company secretary, Allen Masiya, said the listed firm, which has a negative equity position of $211,5 million, had secured working capital facilities to import additional underground mining equipment to boost production.

The company, one of Zimbabwe's largest coal producers, managed to bring back its underground mine into production during the last quarter of 2017.

Masiya said the company's thrust was to rely more on its own capacity and to reduce equipment hire.

"At the same time, the company will develop and secure export markets in Zambia, South Africa and the Democratic Republic of Congo so that it can finance its imported production inputs such as spare parts and explosives," he said.

He noted that the first section of the underground mine will be operating at full capacity by mid this year after operations resumed in December last year.

"The development of a second and a third portal at the underground mine is at the initial stages," Masiya said.

Hwange used to export over 62 000 tonnes of coal every month into the region including the DRC, Botswana, Malawi, Tanzania and Zambia, but lost the regional markets due to operational challenges.

"The company's negotiations to take over the Hwange Coal Gasification Company coke oven batteries are underway along with the enquiries to replace or rebuild its own coke oven batteries," he said.

The London and Johannesburg Stock Exchange-listed firm, which is sitting on two billion tonnes of coal reserves, produced 1,2 million tonnes of coal in the 12 months to December 31, 2017, from 921 000 tonnes recorded in 2016.

The company's open cast operation contributed 589 142 tonnes for the year, which represented 47 percent of the total year end production.

Masiya said there were notable constraints in the logistics and processing section of the value chain which were being addressed.

"While the company is focussed on ramping up production to above break-even point, it is also cognisant of the fact that the sales mix is important in order to lower the break-even point and to achieve profitability."

"Therefore the mining contractor's operations are dedicated to mining the lower value thermal and industrial coal, while the company's capacity has been deployed to mine higher value coking and thermal coal," Masiya said.

Hwange, which used to enjoy a monopoly in coal mining, indicated that it would continue to review its cost structures to compete in the face of competition.

"Apart from employment related cost reductions, the company is determined to focus on its core business and allow the non-core units to operate independently without any financial support from the mining operations. The company will sweat its assets and unlock value from its non-core assets so that it is able to direct its resources towards increasing production and also deal with its debts in the Scheme of Arrangement," Masiya added.

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