Operations at Hwange Colliery Company Ltd’s (HCCL) Chaba concession resumed this week after Mota Engel, the Portuguese company contracted to mine the area, went on a week-long production strike demanding outsanding debts, businessdigest has established.
Well-placed sources told businessdigest this week that HCCL’s mining contractor resumed operations at the colliery, a development that has breathed life at the group.
Mota-Engil had stopped mining operations at Hwange in protest over delayed payments. The company is owed around US$7 million by the colliery.
Mota-Engil is a Portuguese industrial conglomerate whose principal activities include civil engineering and construction of infrastructure including bridges, dams, industrial buildings, schools, chimneys and roads; energy and steel works (including steel structures, energy equipments and electricity); transport concessions and environment and services (waste, water treatment and multi services).
The Portuguese firm secured a five-year mining contract with HCC early last year after HCCL floated a tender for a contract miner.
The contract involved drilling works, detonation, load and transportation of coal at the Colliery’s Chaba open-cast mine.
Hwange owes its employees around US$80 million in outstanding wages.
The company has installed capacity to produce 6,2 million tonnes of coal per annum.
HCCL’s management hopes to reverse its gross loss position in the last quarter of this year.
HCCL CEO Thomas Makore told businessdigest in an interview in June that the company’s gross loss position was migrating towards a break-even on a month-to-month analysis in the five months to June.
“However, cumulatively we expect to have significantly reversed the gross loss performance in the last quarter of 2015,” he said.
“With competition, the profit margins have been varying from company to company and largely depend on the business model, with some companies targeting and achieving margins from 10% to 30%.”
HCCL purchased the equipment from a Belarus firm, Belaz and BEML of India through a vendor financing scheme secured from PTA Bank and India Exim Export Bank respectively.
Although the equipment was commissioned in June, management is contending with teething problems associated with breakdowns.
About five of the heavy machinery that were acquired under the new deal had faults, management said.
Hwange is grappling with working capital constraints and is in need of working capital.
Two years ago board members Nkosilathi Jiyane, Siphiwe Mapfuwa and Lucas Nkomo were also shown the door leaving Jemister Chininga, Ian Haruperi, Shingirayi Chibanguza, Valentine Vera and Juliana Muskwe as the remaining board members.
Government is the major shareholder in the company with a 37% equity, while British tycoon Van Hoogstraten holds a 30% stake.
HCCL’s operating loss widened in the half year to June to US$19 million from US$7 million recorded during the same period last year.
Sales revenue during the period stood at US$35,4 million compared to US$39,9 million recorded during the same period last year. Operating loss shot up to US$19,5 million compared to US$7,6 million last year.
The company said it sold 685 759 tonnes of coal and coke down from 764 813 tonnes during the same period last year.
Coal deliveries to the Hwange Power Station went up to 409 842 tonnes from 394 451 tonnes.
The company announced plans to convert debt to equity a few months back.
HCCL said it is working on its new concessions in the Western Areas of Lubimbi East and West, adding focus was now on commencement of field exploration work.
“The new concessions are strategic to the growth of the company. The new coal reserves also enhances Hwange Colliery Company Limited’s capacity to fully support power generation projects, including the expansion projects like Hwange Power Station Stage 3,” said the company.