Hwange signs $260m contract

Published: 09 December 2013

COAL miner Hwange Colliery Company last Friday signed a $260 million mining contract with Portuguese firm, Mota-Engil which is expected to double production from current levels.

The contract, expected to commence in April next year will run for the next five years with production expected to reach 200 000 tonnes per month by December next year, Mota-Engil managing director Mr Blake Mhatiwa said last Friday in an interview.

"It is a fairly big project and our plan is to ramp up production from the day we commence operations to 200 000 tonnes per month in eight months," said Mr Mhatiwa.

"Thereafter our next target would be the second phase, but it depends on how we perform."

Hwange is currently producing 140 000 tonnes per month, but if properly capitalised, it can raise capacity to 400 000 tonnes, acting managing director Mr Jemmester Chininga said.

"The company is facing challenges in terms of capitalisation due to liquidity constraints and as such, we have decided to acquire capacity without raising capital," said Mr Chininga.

"We will use it as a base to build our own capacity."

According to the agreement, Hwange Colliery would pay Mota-Engil on a set price per tonne for coal mined. Some of the workers will also be absorbed by the contractor.

Under most contract mining agreements, the contract miner is generally responsible for providing all equipment, financing its operation, internal mine capital needs, employee salaries and benefits and all other requirements associated with an independent business

Hwange recently commissioned equipment bought from Sany Heavy Equipment Corporation of China, but there was need for additional capacity to achieve optimum output levels, Mr Chininga said. Hwange requires $175 million for full recapitalisation.

Mr Chindori said the board would soon meet to consider recommendations by Infrastructure Development Bank of Zimbabwe on a $50 million bailout offer by Mr Nicholas van Hoogstraten, the single largest shareholder in the country's biggest coal miner.

Hwange is operating below capacity, largely due to production inefficiencies associated with the use of old machinery, shortage of working capital and skilled labour force.

The company is also failing to meet domestic demand due to low production levels.

Mota-Engil operates in 20 countries in Europe, Africa and Latin America. Apart from mining, it is also involved in areas such as engineering and construction, hydro power stations, dams, roads, ports, railway as well as underground tunnels.

In Africa, it has operations in Malawi, Mozambique, Angola, Zambia, South Africa, Cape Verde and Ghana.

It is currently looking for opportunities in Tanzania and Namibia.
- herald

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