After months of negotiations, listed coal miner, Hwange Colliery Company Limited (HCCL), will next week finally meet its creditors as it seeks a deal to restructure debts to enable the company to implement its turnaround plan, it has been learnt.
HCCL spokesperson, Rugare Dhobbi, told the Financial Gazette’s Companies & Markets (C&M) that the meeting would be crucial in that if the plan is approved, it would allow the company to access fresh funding from financial institutions.
Dhobbi said: “To allow us an operating space to implement the holistic and inclusive turnaround plan, the company will be entering into structured payment plans with its creditors after approval at a creditors’ meeting. The scheme will enable the company to access working capital from financial institutions who have cited the need to address the company’s balance sheet by converting current liabilities to medium and long -term commitments.”
She said the meeting with creditors would take place on April 26, 2017, paving the way for increased production.
She said government support would be a welcome development through the issuance of treasury bills to essentially support the scheme of arrangement.
Government is the major shareholder in HCCL, controlling about 37 percent in the company while British tycoon, Nicholas van Hoogstraten, through his investment vehicle, Messina Investments, owns a 30 percent interest in the company.
The National Social Security Authority has a 5,87 percent shareholding while Mittal Steel Africa Investments controls a 9,76 percent stake.
HCCL employs more than 3 000 workers and supports a town of about 55 000 people. It is, therefore, viewed by government as a strategic operation.
HCCL used to be the largest coal miner in the country until the emergence of Makomo Resources in 2010, which has chipped off its market share. The Zimbabwe Stock Exchange listed company which also has pockets of its shares trading on the Johannesburg and London stock exchanges, where the coal miner has secondary listings, has been making losses for more than a decade and owes millions to tax authorities, employees and the pension fund.
In its financial results for the year to December 31, 2016 released recently, HCCL narrowed its loss by 22 percent to US$90 million, from US$115 million reported in the previous year.
Revenue declined by 41 percent to US$40 million compared to US$68 million recorded in the previous year due to poor sales.
Total annual coal production volumes decreased to 38 percent as the Portuguese mining contractor, Mota-Engil, which was engaged a few years ago to mine HCCL’s Chaba open cast mine, experienced a decline in its contribution to production volumes to 58 percent during the period under review from 63 percent in 2015.
Total liabilities stood at US$350 million against total assets of US$183 million.
“Hwange Colliery Company Limited notes with concern its recently released 2016 annual financial results statement on the organisation’s performance published on March 31 2017,” the company said.
“Low production levels have led to decreased sales volumes, negative profit after tax and negative gross profit in the period under review.
“Management with the support of the board is aware of the unsustainability of any further decline and is focused on plans to turnaround the company. Measures to effectively turnaround the company are currently in progress. While our last year’s figures project a gloomy outlook, the company wishes to advise that no effort is being spared to address operational constraints and working capital limitations.”
In January this year, C&M reported that the coal miner had faced serious funding challenges, prompting the Portuguese contractor to suspend operations over failure to pay a US$50 million debt.
Under the terms of the contract worth about US$260 million, Mota-Engil had been mining 200 000 tonnes of coal a month from Chaba while HCCL produces about 60 000 tonnes of coal monthly.
But HCCL managing director, Thomas Makore, last week said Mota-Engil has resumed mining operations and expected to reach 200 000 tonnes a month in production output before the end of June this year.
Makore said HCCL was planning to increase production in the open pit operations.
He said: “Management interventions are underway to make the mining equipment more reliable and available for operations so that production will increase to 100 000 tonnes a month in mid-year 2017.
“In addition, resuscitation of underground mining will contribute high value coking coal to the production mix by mid-year. The continuous miner equipment that had a major break down in August 2015 is undergoing major refurbishment commencing this month. The exercise is expected to take about three months to complete.”
HCCL is also pinning its revival hopes on a quick exploitation of its three new coal concessions. Government granted HCCL new coal concessions in Western Area, Lubimbi East and in 2015 with an estimated a resource of 750 million tonnes of mainly coking coal and thermal coal. Financial Gazette