HARARE – Hwange Colliery Company plans to ask shareholders for more money as Zimbabwe’s second-biggest coal producer seeks to restructure $70 million in debt and struggles to pay employees because of a drop in prices.
The debts arose when the country abandoned the Zimbabwe dollar in 2009 in favour of multiple other currencies, including the United States dollar and South African rand, to help contain hyperinflation.
Hwange managing director Thomas Makore revealed the plans in an interview.
“We have discussed with our major shareholders how to liquidate this debt, so we have agreed that we do a rights issue,” he said.
Formal consultation with shareholders has started and Hwange is seeking approvals for a circular from the Zimbabwe Stock Exchange, Makore said.
Hwange is Zimbabwe’s largest coal miner after Makomo Resources (Pvt) Ltd and a supplier of the fuel to State-owned power utility Zesa Holdings, which doesn’t generate enough for the country’s needs.
The company has been held back by ageing equipment and owes its 3 200 employees about $20 million in salaries for the past 13 months.
Coal producers worldwide are suffering as companies such as Glencore Plc, the biggest exporter of the power-station fuel, raise output even after prices dipped to the lowest in five years.
Thermal, or power-plant, coal delivered to north-western Europe free-on-board from Richards Bay in South Africa rose for the first time in five days yesterday, adding 0,8% to $66,50 a metric ton, paring the drop this year to 20%.
Zimbabwe’s government is the biggest shareholder in Hwange Colliery with a 37% stake, while British businessman Nicholas van Hoogstraten holds 20% through Messina Investments Ltd.
As part of the restructuring, the company is getting loans to buy equipment.
It is finalising borrowing of $80 million from the Eastern and Southern African Trade and Development Bank, known as PTA Bank, said Makore.
The funds will be used to buy open-cast mining equipment from BelAZ Ltd, a Belarusian truckmaker.
Hwange is sourcing another $15 million of equipment from BEML Ltd, a State-run Indian construction equipment maker, and Ravanthi Ltd, which will be financed through Export-Import Bank of India, he said.
“This capacity will enable our open-cast production to reach about 300 000 tonnes a month,” said Makore, who joined in June.
“Right now, we are doing about 200 000 tonnes a month. We want to be able to produce with reliability and predictability.”
The company has secured $6 million in working capital from regional banking group, BancABC Ltd, which is based in Gaborone, Botswana.
Mota-Engil SGPS SA, Portugal’s biggest builder, started “mining on a separate pit and augmenting operations” in August, Makore said.
Coal sales fell 16% to 764 813 metric tonnes in the first half from a year earlier, while revenue declined 18% to $33 million, the company said on September 30.
Its loss widened to $7,9 million. The company exports about 5 000 tonnes of coking coal, used to make steel to South Africa every month, with merchants selling the fuel to companies including ArcelorMittal’s local unit, which is the continent’s biggest producer.
Hwange has started restructuring its business into three units — mining, estates and medical — to improve cost controls, Makore said.
The company has applied for concessions in the western part of Hwange, which has one billion tonnes of coal reserves, he said.
“We are still waiting for the official communication and confirmation about outcome, but we remain optimistic that we will be granted that concession because it’s strategic to us.”
The concession would enable the company to supply more to the 940MW Hwange coal-fired plant, which China’s Sinohydro Group Ltd is expanding by 600MW.
“Once the economy is turning around, the demand for coal is going to be massive.”