Hwange shareholders turn down share option scheme

Published: 30 June 2014

Hwange Colliery Company Ltd (HCCL)'s shareholders have turned down the company's proposed share option scheme in what could be interpreted as a victory for Nick van Hoogstraten who once turned down the scheme.

Van Hoogstaten owns a 30 percent shareholding in the company. Hwange introduced a share option scheme in 2005 for a period of 10 years to 2014, but in 2007 van Hoogstraten blocked the scheme after workers had already exercised their rights on the options that year.

But a special business resolution at today's AGM sought to recommend the board of directors to approve compensation to workers for monies paid for the 2007 share option scheme. The recommendation was, however, turned down this morning.

Speaking to journalists after the AGM, managing director Thomas Makore said the resolution to refund the respective 2 315 beneficiaries a fair amount for the shares that they paid for has been denied by the HCCL shareholders as they feel the share allocation was very low and would be favourable to the employees.

"The share option scheme dating back to 2007 which has been long outstanding was not approved by the shareholders. The share option scheme was not approved because shareholders feel share allocation happened after expiry date and that it was very low and favourable to employees," said Makore.

According to Makore, the company owes a combined $32 million to employees and creditors.

"We are in default of payments of salaries to staff up to $19 million as well as creditors that have taken us to court to the tune of $13 million," he said.

He said currently the company is operating with a negative working capital and is attempting to pay off its debts.

"We have a negative networking capital which means our current liabilities are exceeding our current assets. Another issue is that we have a big interest burden because of legacy debt. In the past 24 months the company has paid in excess of $35 million to service that legacy debt," he said.

Makore added that the large debt is making it difficult for the company to access credit lines from financial institutions but they are working to convert Government debt into equity.

"Because of this legacy debt and our negative working capital, financial institutions view us as high risk therefore when we discuss and negotiate credit lines they are not favourable because they see us as having a weak balance sheet.

"To address the legacy debt we want to convert Government debt to equity and that's an initiative that is being discussed with the Government and we anticipate to should reach agreement in the short term," he said.

"The director's remuneration of $476 352 for the year ending 31 December 2012 was not supported by the shareholders."

Currently HCCL is working on recapitalisation plans to boost productivity to their target of 300 thousand tonnes per month.
- BH24

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