Hwange to spend US$17m on recapitalisation

October 7, 2020

TINASHE MAKICHI

Coal mining giant, Hwange Colliery Company Limited (HCCL), will invest close to US$17m towards increasing its coal production by at least 50% in the coming financial year.

The coal mining concern’s target is to ensure that production is skewed to own mining as it is not only cheaper but more reliable particularly given cash flow challenges that have dogged the company in the recent past.

Under the proposed investment, HCCL is looking at consistently producing 200,000 tonnes a month to have a sustainable business.

The mining firm will invest US$10m on its own open cast mining while US$7m will go towards stabilising underground mining.

“Owing to the above a recapitalisation programme has been embarked on, which if successful will result in production increasing by at least 50% in the coming year,” HCCL administrator Bheki Moyo told Business Times.

In its half year to June 30, 2020, the company posted an inflation-adjusted profit after tax of ZWL$577m from a loss of ZWL$2.3bn in the comparable periods last year. Gross profit was up to ZWL$560m from ZWL$354m.

On a historic cost basis, according to Moyo, the company’s performance improved from a gross profit of ZWL$34m for the same period in 2019 to a gross profit of ZWL$357m for the half year under review.

“It is interesting to note that prior to the company being placed under administration, it was making gross losses for a sustained period,” Moyo said.

The company however had a net loss position of ZWL$992m for the period under review compared to the net profit of ZWL$3.5m for the same period in 2019 due to an exchange loss of ZWL$1bn on legacy foreign creditors Total legacy foreign creditors currently stand at US$20m.

Revenue for the period increased 28% to ZWL$1bn for the half year under review from ZWL$827m in 2019 attributed to a combination of an increase in high value coking coal sales as well as frequent adjustments to product prices in line with changes to the interbank rates.

During the period under review, total production increased by 84% to 596, 876 tonnes from 325,114 tonnes in 2019 and this was due to an increase in production by the contractor.

HCCL this year appointed Chinese company Zhong Jian to undertake contract mining on a yearly renewable contract and government which owns 52 percent stake in the coal miner, had to put the company under reconstruction last year under the stewardship of DBF Capital Partners in a bid to set it on a profitability course.

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