Hwange debt validation complete

via Hwange debt validation complete | The Herald December 21, 2015

THE validation of the money Government is owed by Hwange Colliery Company in tax liabilities to the Zimbabwe Revenue Authority has been completed, paving the way for its proposed rights issue.

The Government, a 37 percent shareholder in the country’s largest coal miner intends to convert Hwange’s debt to Zimra for shares, through an $88 million rights offer. Hwange is saddled by a $160 million legacy debt, which includes what is owed to; employees in unpaid salaries ($50 million), the Mining Pension Fund ($25 million) and Zimra ($69,1 million) and other liabilities.

Hwange board acting chairman Mr Jemister Chininga confirmed to The Herald Business that the rights issue is set to go ahead but could not divulge more details.

“We are expecting details of the rights issue to be published soon. I can’t give further details now but we are working flat out to clear our debt overhang,” he said.

Mr Chininga said the company has agreed to spread the debt with MPF over a five-year period while an agreement with employees has been reached on how to clear salary arrears.

“We are going to spread the debt we owe to MPF over a five-year period. This means if the almost $70 million we owe to Zimra is converted into equity; we will be left with $50 million for our employees,” he said.

The debt-to-equity conversion is part of the ongoing financial restructuring at the company, whose shares trade on the Zimbabwe, Johannesburg and London stock exchanges.

It will be underwritten by the Government.

Government is the biggest shareholder with 37,10 percent stake while business magnet Nicholas Van Hoogstraten controls 16,76 percent through his Messina Investments.

Hwange managing director Mr Thomas Makore also confirmed the development.

On operations, Mr Makore said the company was facing challenges largely due to recurrent breakdowns of some of the machines recently acquired from BEML of India under a $13,3 million vendor financed transaction facilitated by the Eximbank of India.

While production should have increased since the commissioning of the equipment in June this year, output has remained low. “We are having serious problems with the excavators and it is affecting the whole value chain,” said Mr Makore.

“We are talking to the supplier . . . probably to have those machines replaced since they are on warrant.”

Hwange was targeting monthly output of 450 000 tonnes following the commissioning of the equipment. But production has remained low.

Last month, the company produced 200 000 tonnes of coal, up from about 70 000 tonnes produced in October. To support the company’s recapitalisation and ability to raise capital, the Government recently granted Hwange new coal concessions in Lubimbi and western areas.

The concessions, with an estimated underground resource of 750 million tonnes, according to an independent competence report done by SRK Consulting, is expected to increase the life span of the coal mining firm by more than 50 years, according to the management.

Hwange has been battling to secure new concession over the past decade, a situation which made difficult for the company to raise capital.