Hwange HY coal production up 84%, but old debts still weigh on colliery’s recovery

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Hwange Colliery says coal production rose 84% in the first half of the year, but old debts continue to weigh on plans by the country’s oldest coal miner to reverse years of decline.

In the six months to June, total production grew from 325,114 tonnes in the first half of 2019 to 596, 876 tonnes. This was largely down to an increase in production by Chinese contractor Zhong Jian, which grew output by 143% at the open cast pit.

“Our target going forward is to ensure that production is skewed to own mining as it is not only cheaper but more reliable particularly given cash flow challenges that have dogged the company in the recent past,” Hwange says in their latest financial statements.

The company has started a recapitalisation programme that, if successful, would raise production by 50% in the coming year. In order to run profitably, Hwange needs to produce 200,000 tonnes of coal per month, which is double its current output.

While opencast mine output carried overall output, underground production was 32% below budget at 78,573 tonnes.

In 2018, the government, a 37% shareholder in Hwange, placed the company under administration. However, other shareholders, among them 27% owner Nick van Hoogstraten, challenged the reconstruction order in court.

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Hwange debts

In its latest report, Hwange says it expects to stabilise operations within six to 12 months, as its “fortunes continue to improve a lot of funders are now interested in extending lines of credit to the business”.

However, Hwange admits that “due to the current status of the company”, it has been hard to raise working capital and long term financing to support its recovery plan. Legacy debts of US$20 million remain a blot on the company’s books.

“It is interesting to note that prior to the company being placed under administration, it was making gross losses for a sustained period. The company however, had a net loss position of ZWL 992 million for the period under review compared to the net profit of ZWL 3.5 million for the same period in 2019 due to an exchange loss of ZWL 1 billion on legacy foreign creditors. Total legacy foreign creditors currently stand at USD 20 million and therefore this problem will persist until these have been fully settled.”

Demand for coal is set to increase when two new units being built at the Hwange thermal power station come on stream at the end of 2021. The units will add 600MW.