By Bernard Mpofu, HWANGE, June 19 (The Source) – Government has committed to grant more mining concessions to Hwange Colliery Limited (HCCL) and acceded to its proposed $88 million rights issue that will help the coal miner clean its balance sheet for its turnaround, mines minister Walter Chidhakwa said on Friday.
Hwange has been struggling due to a legacy debt — which stood at $136 million in December last year after paying $60 million in the past two years to service it — that has seen it struggle for operating capital.
Its full-year to December 2014 performance was punctuated by a $37 million loss with non-recurring items costing the company $13 million.
Chidhakwa said government had resolved to revive the Colliery’s fortunes after its inaction led to the closure of iconic mines such as Shabanie and Mashaba, Mhangura and Kamativi. It has previously committed to underwrite the rights issue.
“We agreed that we would give you concessions to extend the life of your mining activities and I want to assure that you that this is going to happen,” Chidhakwa told HCCL officials after a tour of the mine.
“We went into discussions about the debt that is being owed by the Colliery to the government and I had the occasion to meet the second largest shareholder, Nick van Hoogstraten to discuss the issue. I said to him do you have money so that we can resuscitate the activities of the business and he said to me: minister if you have money, I have money.”
He said Hwange owed government $78 million but did not explain how the debt came to be.
“We agreed to convert our debt to equity on condition that our partners in business will inject money that is equivalent to their shareholding structure in the business. That is the route that we are following and I want to assure you that in the next few weeks you will see a rights issue, you will see the cleaning of the balance sheet of Hwange Colliery so that PTA and the Indian Export and Import Bank do not deal with a company that is bankrupt, ” added Chidhakwa.
The Export and Import and Bank India and PTA Bank loaned Hwange $31 million for the purchase for the open cast mine equipment from Belarus and India which will see production increasing to 500,000 tonnes per month from the current 300,000 tonnes
The company has also invited bids for the supply of underground equipment worth $10 million under the second phase of the company’s recapitalization programme and is also seeking funds to revive its coke oven battery to push more coke volumes into the region.
“We have received expression of interests from suppliers of underground equipment and we are looking at them,” chief executive Thomas Makore said while briefing journalists on progress of the recapitalization programme.
He said the company, which is listed on the Zimbabwe Stock Exchange, JSE and LSE has performed better this year compared to the prior year without giving figures.
“This year our operations are far much better, our production levels are also better,” he said.
“However, we feel our share price is undervalued.”
HCC’s share price closed at 3,90 cents on Friday from four cents on Thursday with 12,000 shares exchanging hands.