HWANGE Colliery Company Ltd (HCCL) could lose more than US$1,2 million after its managing director Thomas Makore entered into an agreement to purchase faulty mining equipment from private mining contractor Turbo Mining at an inflated price, it has emerged.
Documents seen by the Zimbabwe Independent show that on April 24, the two parties entered into the agreement stipulating that HCCL will buy the mining equipment at a cost of US$2 million “exclusive of VAT and any other applicable taxes and levies which may be charged thereon.”
HCCL initially had a contract for mining services with Turbo Mining, which ran out in January 2015 and after that Turbo offered to sell to HCCL some of its equipment which it used during the duration of the contract.
The documents show that as a result HCCL owes Turbo a total of US$5,1 million which includes money for the equipment and US$2,8 million for mining services rendered between December 2014 and March 2015.
According to HCCL sources, the value of the equipment is said to have raised concerns among some board members hence the decision to hire Dawn Property Consultancy to do an independent valuation.
Dawn assessed the equipment on July 13 and found that it was worth only US$807 725, meaning that if the deal goes ahead, HCCL will pay a whopping 250% more for the faulty equipment.
On July 16 after the valuation exercise, Kudakwashe Chadambuka of Dawn Properties, wrote to HCCL stating that, “it is our opinion that on the July 13, 2015 the plant and the machinery of Turbo Mining had a fair value of US$807 725.
“We confirm that the valuation has been made in accordance with the relevant professional guidelines and statements issued under the Royal Institute of Chartered Surveyors Appraisal and Valuation Manual (the Red Book) and the Real Institute of Zimbabwe Standards.”
Dawn’s valuation report shows that some of the equipment was not operational and its value had been “unreasonably” overstated.
Makore, however, defended his decision stating that they did their own valuation which gave a figure which is “much, much closer” to what they had agreed with Turbo.
“We had another valuation done. You know valuations are not absolute and our valuation is higher than that for Dawn,” said Makore in an interview on Tuesday.
“That valuation was done by our Supplies and Equipment (department). So we actually have our own valuation plus the Dawn valuation plus another valuation. Actually we have three valuations and it’s higher than the Dawn valuation”.
Makore also said the deal is only awaiting board approval.
Hwange was already embroiled in another scandal as it emerged in July that it commissioned US$31 million worth of faulty equipment bought in India.
The overvalued equipment includes front end loaders, compressors, storage containers, crawler hydraulics, motor vehicles, conveyors and pilot crushtec plants. HCCL also agreed to buy two non-running Volvo L220F front-end loaders whose initial value was US$100 000 each before Dawn placed them at US$35 000 each.
HCCL also agreed to buy a malfunctioning CAT 992C front end loader at US$300 000, but Dawn valued it at US$150 000.
A pilot crushtec plant which Turbo pegged at US$900 000 was later re-valued at US$309 000, while the price for an Atlas Copco compressors which had been given as US$125 000 was re-valued at US$56 000.
Hwange also agreed to buy a mobile screen for US$95 000 when its actual value was US$25 000. An electric power line and 10 gum poles had been pegged at US$40 000 when its actual value is US$1 695.
HCCL agreed to clear its debts in monthly instalments with the first instalment of US$325 000 being paid on or before July 31 2015. All payments are to be made to Turbo’s NMB Borrowdale bank account number 260091603.
Additionally, Hwange will pay 800 tonnes of industrial coal every month, at the rate of US$58 per tonne until the debt is cleared.