The Zimbabwe government could emerge with a controlling stake in listed coal producer Hwange Colliery Ltd in the wake of an impending rights issue and a debt-to-equity conversion, it has emerged.
This comes after it was revealed government, which already holds a 40,25% stake in the company, decided to convert a US$80 million debt owed by Hwange Colliery into some shareholding through a debt-to-equity swap.
Post the debt-to-equity conversion, the company is believed to be looking at pursuing a capital raise via a rights issue.
Should the company float additional shares through a rights issue, other shareholders in the colliery are unlikely to follow their rights.
Although Hwange Colliery MD Thomas Makore and Mines minister Walter Chidhakwa were at pains to give the impression that Nicholas van Hoogstraten, the second largest shareholder in the company with an 18,02% stake held through Messina Investments would follow his rights, insiders say the businessman together with Mittal Steel Africa Investments (Mittal Steel)’s capacity and willingness to follow their rights in the business was questionable, particularly given that it continues to struggle.
“There are a number of possible scenarios and the most likely, given what is prevailing on the ground, is that Van Hoogstraten and this 10% shareholder Mittal Steel will not follow their rights,” said a source who requested anonymity.
Mittal Steel is the third largest shareholder with a 10,59% equity, while other shareholders have a combined 31%. Hwange reported an attributable after tax loss of US$37,2 million and US$31,6 million in 2014 and 2013 respectively from a profit position averaging US$3,9 million between 2009 and 2012.
Tabulated data from the company’s statements of financial position between 2009 and 2014 show that shareholder funds stood at US$38 million at the end of 2014 from US$75 million at the end of 2013, while net current assets stood at a negative US$122,3 million in 2014 from a negative US$77,2 million the prior year. The company’s net current assets amounted to a negative US$9,1 million in 2009.
The company owes between US$34 million and US$35 million in salary arrears to about 3 000 employees.
To end the era of bad performances, Hwange has invested in US$31,2 million worth of equipment expected to raise coal output to 500 000 tonnes from 300 000 tonnes and drive the company to profitability.
The equipment, commissioned by Vice-President Phelekezela Mphoko last week, was purchased through two financing structures from the Reserve Bank of Zimbabwe and PTA Bank on one hand, and the Export and Import Bank of India on the other. The cost of equipment will be aggregated into government debt.
Chidhakwa said government has agreed to give Hwange additional coal concessions to increase its life span. The Mines minister said the process was almost complete.
Makore said the company was looking to export to South Africa and other markets in Asia and Europe as part of an initiative to open new markets. He also said the group structure was unbundled to manage costs and improve on efficiencies.