Increased volumes, efficiency lift Hwange Colliery

HWANGE Colliery Ltd’s capacity utilisation has risen to around 60%, but the company needs around US$110 million in capital to lift output to full capacity, company CEO Fred Moyo (FM) says.

Zimbabwe Independent chief business reporter Paul Nyakazeya (PN) spoke to Moyo about his company’s operations and plans. Below are excerpts:

PN:What is Hwange’s current capacity utilisation and what have been the major challenges over the past two years?
FM: We are operating at 60%.  Some of the challenges faced by the company include lack of capital, depressed markets, low prices and logistics to move products. The company is currently experiencing challenges in the distribution of products to our customers due to logistical challenges in the region.
PN: Have South African companies Fosbel Bell and United Kingdom’s Otto Simon finished repairing the 32-coke oven battery and how much did it cost you?
FM: The project is in two phases. The first phase was the repair work of which 24 ovens out of 32 are now functional. So far the project has cost US$10,9 million. The rest of the ovens are to be completed by March next year.
The second phase is a rolling rebuild/refurbishment which is expected to last another two years from the time it starts, which is expected to be end of the first quarter. It must be noted that the battery was overdue for rebuilt, but due to economic challenges this was not done. The last rebuilt was done in 1987.
PN: How did the breakdown affect your operations?
FM: Lost revenue amounted to US$6 million. Serious cash flow challenges are still affecting the organisation as a result.
PN: What products are produced and sold by Hwange and to which markets?
FM: Our projected activity for the coming year is as follows: thermal coal, HPS and peas to smaller power stations which constitute 60% of our total volumes. Industrial coal mean’s to industry and agriculture, Fines — to cement industries (Zimbabwe and Zambia). Coking coal: To Zisco, Hwange coal gasification and South Mining (both are Chinese investors), Coke to foundries, ferrochrome and steel industries (Zimbabwe, Zambia, DRC), tar and crude benzol to Zimchem Refineries in Redcliff.
PN: How would you picture the Hwange Community without Hwange Colliery?
FM: It is our sincere belief that Hwange Colliery Company Ltd will be around for many more years. The company is not only key to the Hwange community but the province and nation at large as it is central to the wellbeing of the country’s economy. However, everyone within Hwange and the province is optimistic that government through the Ministry of Mines and Mining Development will grant us the necessary concessions to protect the company’s future.
PN: Do companies such as Clidder offer you stiff competition?
FM: It has to be noted that Clidder has been doing contract mining for Hwange in the past. Payment was through coal and it is this barter deal that allowed Clidder to deliver coal to the market .Clidder is therefore Hwange’s contractor and not a competitor really.
PN: Hwange Colliery recorded a significant increase in industrial coal sales by three-fold to nearly 320 000 tonnes compared to the just over 100 000 tonnes sold the previous year, according to the company’s recently released financial results for the half year ending June 30 2010. What do you attribute this to and what are you expecting by December 31?
FM: We acquired new pieces of equipment at the beginning of the year. The equipment was deployed at Chaba, where industrial coal is produced. We have also commissioned a mobile screening plant at the same mine. This development has resulted in increased volumes. The screening plants will now be targeted to supplying coal to urban thermal power stations. The expected total industrial coal to end of year should be well over 530 000 tonnes.
PN: Hwange recorded an unaudited net profit after tax of US$4,5 million during the same period despite a challenging operating environment. What is your target for the full year?
FM: The profit is largely attributed to increased volumes and improved efficiencies in our operations.
Due to ongoing major works on the mine we expect the modest profitability to maintain a positive trend. Short-term borrowings are, however, a major cost challenge to the company yet unavoidable under the current economic environment.
PN: What became of Gateway Overseas consortium’s bid to buy out government’s 43% stake in Hwange?
FM: Hwange is not aware of this said approach to purchase a stake in Hwange by Gateway.
PN: Hwange was reported to be on the verge of concluding a US$110 million deal with the IDC of South Africa, PTA Bank, and the Development Bank of Southern Africa (DBSA). What became of this deal?
FM: All material requirements were agreed and concluded. The remaining obstacle is the issue of coal resources and reserves report which must comply with South African Mining Resource (Samrec). This is a fundamental requirement of most funding organisations.
The report is almost complete and we still expect the deal to go ahead in the near future. Meanwhile DBSA has approved a bridging funding facility for the colliery.
PN: How much is needed to ensure that Hwange operates at between 90%-100% capacity.
FM: The original estimates as per the DBSA application remain. However the shifts in market trends suggest that the company not only has to consider refurbishment of coke oven batteries, but also the expansion of the underground works as well as investment in logistics.  There may be therefore a shift in focus but the quantum will remain around the original figure of $110 million for Phase 1 capitalisation.
PN: At what capacity have the three operational mines, namely JKL Opencast (widely known as the dragline pit), Chaba Opencast and 3 Main underground Mine been operating at?
FM: JKL has started recovering after repairs to dragline. However, recovery is rather slow due to shortage of dragline support equipment. This is the main source of coking coal and contributes 40% of our output. The 3 Main Underground Mine has experienced major equipment challenges and its contribution is 10 % of total output.
Chaba Opencast has worked well contributing 50% of total volumes. JKL    40%, Chaba 50% and 3 Main 10%.
PN: Who is Fred Moyo and what inspires and motivates you?
FM: Fred Moyo is a mining engineer who believes in the role of mining to develop and improve the country’s economic fortunes.  Most developed countries we see today achieved their development through exploitation of mineral resources in their countries and indeed largely from Africa. Africa can still achieve the same and mining engineers play a pivotal role in this effort.