HCCL to increase production

Published: 06 March 2014

HWANGE Colliery Company Limited (HCCL), the country's largest coal miner, is to increase output from 150 000 tonnes to more than 450 000 tonnes by end of this month, The Financial Gazette's Companies & Markets (C&M) has learnt.

Sources familiar with developments at the resources giant, which has a multiple listing on the Zimbabwe, Johannesburg and London stock markets, said the output growth, a result of massive recapitalisation programme, would see the company realising a turnover of about $17 million a month.

HCCL is expected to increase production to over half a million tonnes of coal per month by the end of the year. With rising coal production against diminishing local demand particularly from the manufacturing sector, which remains constrained by lack of funding, competitiveness and infrastructure challenges, the development will allow the Hwange to start pursuing exports markets.

HCCL board chairman, Farai Mutamangira, could not be reached for comment as he was said to be out of the country. Acting managing director, Jemester Chininga, said he could not comment on the issue as the company was on a closed period.

"The issue is I can't comment on the developments at Hwange at the moment because we are on closed period. I will only be able to do so after the end of March when our financial results are published," Chininga told C&M.

The company, in which government is the largest single shareholder, late last year received mining machinery worth about $11 million from a Chinese company, Sany Heavy Equipment Company Limited. This followed another set of mining machinery worth $7 million which had been procured from a South African firm in October 2012.

Coal mining at the company is also projected to increase following the contracting of a Portuguese firm, Mota-Engil, by Hwange in a deal worth $260 million to mine at the company's Chaba open cast mine. The contract, which includes drilling works, detonation, loading and transportation of coal from the Colliery's Chaba open cast to various processing plants, will run for the next five years.

HCCL is expected to produce 250 000 tonnes of coal monthly while the contractor Mota-Engil, expected to run its business autonomous and independent of HCCL operations, is to produce about 200000 tonnes monthly. In another development which is expected to improve the performance of the company, Hwange sealed a $11 million loan deal with the Export-Import Bank of India for the purchase of more plant and machinery.

Recently, the Mutamangira-led board turned to the deep pocketed British magnate, Nicholas Van Hoogstraten , whose family interests controls about 30 percent shareholding in the firm, for a $50 million bailout package, which the board is still digesting. However, C&M understands that van Hoogstraten had proposed that in order to inject fresh capital into the mine, which has been operating below capacity mainly due to production inefficiencies, lack of working capital and failure to access capital to replace its obsolete equipment, his business, Wilbough's Consolidated, should have management control in the company.

Between January and October last year, Zimbabwe's coal miners mainly HCCL and Makomo Resources, produced 3,81 million tonnes valued at $155,4 million, according to figures released by Chamber of Mines. This is significantly lower than HCCL's installed annual capacity of five million tonnes. The company which has been struggling to maximise operations is said to owe workers over $14 million and has a debt which has ballooned to about $160 million.
- fingaz