HomeBusiness DigestHwange adopts low cost high output plan

Hwange adopts low cost high output plan

HWANGE Colliery Ltd unveiled ambitious plans to lift monthly production to 300 000 tonnes per month in the last half of the year from 136 000 tonnes at a minimal costs in the full year to December and beyond.

By Chris Muronzi

In a statement attached to its half-year results to June, the company said it had adopted a low-cost high-productivity strategy, adding it is optimistic increased production can be achieved.

The group said its operating plan for the remaining half of the year will focus on increased production and improved efficiencies, adding this will require allocation of more funding to its operations.

The company did not reveal the amount of funding needed.

“This increase will be complemented by some targeted efficiency interventions that are expected to impact positively on the costs of sales,” the company said. “… Further, since the company managed to resuscitate the underground mine operations, it shall focus on mining high value coking coal. This is with the resuscitation of the Company’s own coke oven battery in mind that beneficiation of coking coal to coke shall create more value for the Company.”

“Innovative ways to deal with the scheme obligations will be explored while production of high margin and value coking coal will be increased. The board, management and staff showed resilience and remained focussed on its turnaround plan implementation.”

Hwange’s open cast operation contributed 296 958 tonnes in the period under review, a figure accounting for 36% of the total half-year production.

“There were constraints in the logistics and processing section of the value chain which are being addressed. Coal movement was largely by road which was an expensive mode of coal movement. The revival of the National Railways of Zimbabwe will come as a solution to the logistical requirements for the product to reach to customers in a cost effective way. Efforts continue to be made to secure working capital,” the company said.

The company resuscitated its underground mining operations in June this year after production ceased in July 2015.

“Since June 2018, the company managed to bring back the underground mine into operation,” it said.

The target was to bring the operation to full production capacity by end of the year. At 50 000 tonnes per month the operation will contribute significantly to the Company’s bottom line and enhance exports.”

Hwange is looking at a possible takeover of the Hwange Coal Gasification Company (HCGC) coke oven battery, but a build-operate-own-transfer agreement with its Chinese partners in the project has been delayed.

“The Company has placed more emphasis and attention on the resuscitation of its own coke oven battery while it shall still continue exploring options for the takeover of the HCGC Battery,” Hwange said.

Local sales for the half year ended 30 June 2018 were 0,68 million metric tonnes which represented a 51% increase compared to the same period last year. Thermal coal accounted for the lion’s share of sales while industrial coal sales to the industrial customers and the tobacco sector also grew.

Coking coal sales will be a key area of focus and growth as the production from 3 Main Underground increases, the company added.

Export sales only contributed only 5% compared to the target of 20% contribution.

The company’s revenue increased from US$18,8million in H117 to US$30,5million in H118. The increase in revenue is owing to an increase in sales volume of 51% and increased prime grades in the sales mix.

The loss for the year decreased by 6% from US$24,5 million recorded in 2017 to US$23 million during the period under review.

The company did not comment on what it was doing to narrow its loss. A look at its income statement shows that Hwange paid out US$10,8 million in administrative costs and another US$8 million in finance costs.

Its balance sheet shows that the business is heavily geared and incurs financial leverage losses owing to a debt pile.

Hwange’s total assets stood at US$181 million against non-current liabilities amounting to US$348 million and current liabilities of US$67 million.

The company has current borrowings amounting to US$12,6million from non-current borrowings of US$154 million and debentures of US$123 million.

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