Four investors submit bids to partner Hwange

Source: Four investors submit bids to partner Hwange | The Herald

Martin Kadzere Senior Business Reporter
FOUR potential investors have submitted bids to partner Hwange Colliery Company to develop mines at its new concessions, managing director Mr Thomas Makore said. Last year, Government granted Hwange new coal concessions in Lubimbi and western areas. The new concessions, with an estimated underground resource of about one billion tonnes, according to an independent competence report done by SRK Consulting, is expected to increase the life span of the coal mining company by more than 50 years.

“We are now in the process of examining the bids at board level,” said Mr Makore in an interview. Hwange is working on a scheme of arrangement, which may see the Reserve Bank of Zimbabwe taking over some of the debts while some creditors will be issued with Treasury Bills.

Mr Makore said the company was now waiting for approval from the central bank. “We are working on a scheme of arrangement which — we expect — will give comfort to financial institutions to extend some lines of credit to us,” said Mr Makore.

While Hwange acquired new equipment from Belarus and India under vendor financing arrangements last year, unavailability of working capital has seen the company failing to fully use the equipment. Hwange is in talks with Agribank for a $7,5 million loan.

In the six months to June this year, revenue for Hwange declined 30 percent to $24,5 million on low production and sales volumes. However, the company narrowed its loss after tax to $22,7 million compared with $44,1 million loss reported during the same period in the prior year.

The loss partly resulted from the challenges experienced with new equipment commissioned in July 2015, which resulted in an increase in the depreciation of assets without corresponding increase in coal output.

Although the group reduced administrative costs in the period on the back of costs commitment measures, chairman Mr Winston Chitando revealed that Hwange faced capital constraints resulting in its performance falling short of budgetary targets.

Monthly average production was 113 862 tonnes against budgeted monthly production of 340 000 tonnes. Total sales tonnage was 585 689 against a budget of 1,771 million and an actual of 842 871 for the period. Coal sales for the period were 35 percent weaker to 211 858 tonnes from 326 075 tonnes sold in the same period last year.

Sales of coal fines and breeze fell 40 percent to 64 413 tonnes while coke sales volumes also weakened 86 percent to 1 040 tonnes. Total liabilities exceeded total assets resulting in a negative equity position of $106 million from $6,8 million due to recurring losses.

It is anticipated Hwange will turn around its fortunes from a loss position to net profit in financial year 2017 on improved operations and cost reduction initiatives. Management is upbeat the company will resume underground operations early next year, which is expected to result in higher margins from coking coal as well as avail coal for coke production.

The company is also banking on operations expansion of the Hwange Power Station under stage three, which will result in increased demand for coal. It is envisaged Hwange will supply an additional 200 000 tonnes of coal per month for the power generation purposes.