SHAREHOLDERS at Hwange Colliery Company Ltd (HCCL) might need to inject about US$50 million as fresh capital in order to bring the troubled coal miner to life once again.
By Nkululeko Sibanda
Mismanagement and corruption are reported to have brought the HCCL, once a major player in the Southern African region, on its knees amid reports that several hundreds of millions of dollars were systematically siphoned from the company through illicit deals.
The company is saddled with a legacy debt running into hundreds of millions of dollars arising from the purchase of equipment that has never been turned on since arriving in the HCCL’s equipment yard owing to technical defects.
HCCL reconstruction board chairperson Bekithemba Moyo told the businessdigest this week from his South African base the company would, by next year, have come out of the doldrums.
“The ideal thing for us as a board, all things being equal, would be to say that Hwange (HCCL) needs between US$40 million and US$50 million if it is to fully recover from its situation.
“With that money, I can tell you that the mine, by this time next year, will be back into full operation and able to sell products that will bring in revenue at a bigger scale, including leaving us in profit position,” Moyo said.
He said it was clear that finding such an amount of money was a Herculian task.
Moyo said his board had embarked on smaller initiatives that were currently raking in money albeit on a smaller scale.
“I am not going to get that money (US$50 million) as and when I want it. With the little that we are generating and what we could borrow, we are confident that by next year, the mine will be up and running and generating profits. When we took over, we had a situation where the Zimbabwe Power Company (ZPC), among other creditors, was owed a lot of money through pre-payments. Our initiatives that we have rolled out as a board have enabled us to clear what we owe to ZPC,” Moyo said.
“Thanks to our initiatives again, we have managed to take production from zero to a situation where we are mining a reasonable amount of coal on a monthly basis. Within the next few months, I am sure that we should be hitting the 150 tonnes a month and this is a significant improvement from a situation where we were virtually not producing anything.”
Moyo added the colliery has been choking under a US$400 million debt owed to various creditors who are eager to recover their dues.
A delicate balancing act, he said, was needed to ensure the entity continues to run as a going concern.
“When we came in, the company had US$400 million debts and making gross losses. The company’s assets were now way lower than liabilities by over US$200 million. We needed to put in place drastic interventions so that we would not totally sink because of the debts. A scheme of arrangement for the company’s creditors had been organised. I must admit that a lot of the terms of the scheme were very good.
Without turning around the fortunes of the company, no matter how good the terms of the scheme could be, you have no chances of being able to pay off the creditors. We are busy at work trying to figure out how best we can further deal with this matter of the creditors and fulfilling the terms of the scheme of arrangement,” Moyo said.
Information gleaned by businessdigest shows the HCCL’s scheme of arrangement is lagging behind schedule owing to the company’s precarious financial position.
Workers are owed salaries running into millions of dollars as the company has been hard-pressed to liquidate the wage bill.
Moyo disclosed that HCCL was still considering ways to deal with the troublesome coke oven battery which the HCCL is said to be basing its operations on.
He said there were various options available such as the company’s acquisition of a Chinese-made coke oven battery.
This, Moyo said, had many downsides as HCCL stood to lose out on some of the by-products that come along with the original coke oven battery.
“Going the China coke oven battery way is a stop-gap measure,” he said.
“The challenge is that once we buy the Chinese one, we will not be able to get some of the by-products such as tar and gas, which are revenue earners in their own right. In the end, I think we would need to bite the bullet and raise the US$130 million required for the type of battery that we have at Hwange, which is down at the moment. The task is to build the foreign currency pool by coming up with high volumes of coal and coming up with the coal that will fetch a good price on the market so that we are able to get this coke oven battery issue sorted out.”
Moyo said employees at the company were safe as his board was not considering laying off workers.
“Without a doubt, we are overstaffed.
The only kind of saving grace is that the salary, looking at it in the context of obtaining macroeconomic fundamentals, is not that big.
“We have to get to a stage where we have to make a determination whether to grow the production to maintain the staffing levels we have or we have to downsize so as to be able to manage our financial situation.
“I would rather try to increase production so that we have minimal job losses.
If that fails, we will be left with no option but to downsize, which is the last resort,” Moyo added.