Hwange ditches plan to halt underground mining

LIVINGSTONE MARUFU

Troubled resources company, Hwange Colliery Company Limited (HCCL), which was placed under receivership six years ago, has abandoned its plans to  stop underground mining, Business Times can report.

The resources company is still blocked from trading  its shares on the Zimbabwe Stock Exchange as a result of its placement under administration due to a number of problems, including technical insolvency and persistent  losses.

The Government of Zimbabwe,is the largest shareholder in HCCL and  controls a 37% stake in the company while the second largest shareholder, the British tycoon, Nicholas van Hoogstraten, holds a 31% stake in the company through his investment vehicle Messina Investments. Minority shareholders hold the remaining shareholding in HCCL.

The latest development was confirmed by the resources concern’s administrator Munashe Shava,who told Business Times, a market leader in business, financial and economic reportage that  the decision  was made in response to an improvement  in coal prices on the international  market.

Initially, HCCL  announced that it would  stop underground mining  by June this year,  to minimise losses from spontaneous  combustion  of excess coal as production was way more than  sales. Spontaneous combustion refers  to  a tendency of coal  or other substance to react and burn into flames due to a chemical reaction.

But, Shava, told this publication this week that underground production would continue.

In addition to that, HCCL has opened a new underground mine to increase production.

“We haven’t stopped underground mining due to an improvement in prices on the international market.  Instead, we have opened a new underground mine to increase production,” Shava said.

Hwange used to enjoy  a monopoly in coal production in Zimbabwe.

But, the emergence of other players such as Makomo Resources, Coal Brick and Chilota Colliery, among others, have chipped off its market share.

According to Shava, HCCL  intends to increase production to capitalise  on the surge in coal prices.

Shava said the company’s sales prices are a hybrid of the greenback and the Zimbabwe Gold (ZiG).

The greenback, Shava said  makes up at least 50% of the  total sales.

Shava said HCCL performed fairly well during this quarter to September 30, 2023, as unaudited profit before tax amounted to US$10.2m better than the previous year.

The company’s performance during the period under review was fairly better as both production of 989 503 tonnes and sales of 911 245 tonnes were almost double from the previous years’ performance mainly due to efficient and effective machinery which was acquired during the first quarter of 2023.

Shava said the  company realised 911 245 tonnes in sales in the third quarter with Hwange Power Station coal (HPS) accounting for 48%, raw coal 39%, Hwange Coking Coal (HCC) 1% and Hwange Industrial Coal (HIC) 12% of the total sales.

During the same period the previous year, HCCL sold 388 487 tonnes of HPS 7%, raw coal 55%, HCC 6% and HIC 32%.

He said for the nine  months to  September 30  2023 the company realised 2 795 303 tonnes  from 1 060976 tonnes in sales with HPS accounting for 43%, raw coal 39%, HIC 17%, HCC 1% (2022: HPS 9%, Raw coal 48%, HCC 8% and H IC 35% of 1 060 976 tonnes), contaminated coal also amounted to 30 229 tonnes (2022: 71 933 tonnes).

“The sales improved from 1 060 976 tonnes for the same period last year to 2 795 303 tonnes achieving a positive change of 163 %. The positive change is attributed to doubling of production as well as increase in marketing effort to sell off the mined coal,” Shava said.

The company’s mining division is the most performing segment out of the three segments, estate division, and medical division.

The mining division contributed 96% of the company’s revenues improving from the last year of 91%, estates division had 3% dropping down from 8% during that same period and the medical division remained stagnant at 1%.

Shava said the improvement of the mining division could be due to new mechanisation of the segment in the first quarter of the year 2023.