The Sunday News
Dumisani Nsingo in Hwange
COAL mining giant Hwange Colliery Company Limited has been limping over the years but has now set its sights on changing the fortunes of its business operations with some of the results expected in the second quarter of the year. In a wide ranging and exclusive interview with Sunday Business on Friday last week, HCCL managing director Mr Thomas Makore said since he joined the coal mining company in June last year a number of initiatives have been made to recapitalise the mine’s operations and part of its efforts were to raise funding through equity investments and lines of credit from banks.
“Our primary listing is in Zimbabwe (Stock Exchange) and we all know about the liquidity challenges in the economy so we have to look at creative ways of raising capital and one of the ways we have done is through vendor financing where we went out to public tender and invited proposals for new open cast equipment.
“We evaluated proposals from a number of suppliers and the successful suppliers were those suppliers that were providing the vendor financing that we secured is that from the PTA Bank and through that facility we are going to get equipment from a company called Belaz from Belarus and the other vendor financing is from India Exim Export Bank able to get equipment from BEML from India,” Mr Makore said.
Vendor finance is a form of lending in which a company lends money to be used by the borrower to buy the vendor’s products. Vendor finance is usually in the form of deferred loans from, or shares subscribed by, the vendor. The vendor often takes shares in the borrowing company.
Mr Makore said the first batch of the machinery purchased through the company’s vendor finance initiative with a total value of $31,2 million was expected to arrive in the country in two weeks.
“The machines are on the sea right now, the first batch will arrive in Durban on Sunday (today) and all things being equal we expect the first batch of machines to be here in two to three weeks’ time and the first batch of machines which is coming from Belarus are dump trucks and front-end loaders.
“The second batch, which will be coming from India and that, will be going to sea next week (this week) and that equipment should be here in the middle of April and that’s a spread of excavators, front-end loaders, dozers, wheel changer, water bowser and other machinery,” he said.
As part of its efforts to raise funds for its recapitalisation process, the company intends to use rights issues through converting Government debt to equity.
“Being a listed company that rights issue is extended to all the existing shareholders so it also means that the other shareholders apart from Government will be allowed to exercise the rights to inject money into the company so that they can maintain their shareholding. So that’s another way of raising money,” Mr Makore said.
He said the company would also continue to source loan funding from various financial institutions both locally and internationally.
Last year, the company got a loan facility from BancABC of about $6 million which it used for short-term intervention in operations and for the purchase of critical parts as well as getting specialised labour to service and maintain its critical plants for optimum production.
Mr Makore said the problems bedevilling the company were a result of the country’s economic challenges and effects of sanctions which had a negative impact on its production costs, and faced with an obligation to meet its costs, its debts accumulated to enormous levels.
“The country went through a hyperinflation period where HCCL was obviously receiving a lot of its sales in Zimbabwean dollars whereas a lot of our import costs were US dollar denominated. So that poses the challenge that you will always have to increase the prices to catch with the costs and that was one factor and the other factor is that with the economic meltdown of course which was precipitated by the sanctions era it became more costly to do business.
“Today now that the country and the economy is recovering and we have started to regain markets that had disappeared, we are starting to retool and recapitalise so that we are able to supply to our major customers locally as well as regionally in Zambia, DRC and South Africa and also to look at even offshore to India,” he said.
He, however, said the coal mining giant’s immediate challenge was to ensure that its mine lifespan was extended since the resources at its opencast concessions were on the verge of depletion.
“The life of our mine in terms of the resources on our opencast mining reserves, have a very short life. Our underground mining reserves have a much longer life so in order to ensure the mine’s going concern status is not threatened we need an additional concession so we have applied for the Western Area and the Lubimbi concession and we are waiting for the ministerial approval and that should shape our short to long term strategies going forward,” Mr Makore said.
The company’s turnaround programme, which was initiated last year is already showing signs of improving the company’s fortunes as realised by an increase in production.
“Our production has significantly increased since Motal Engil started operations at our mine. Our production is now 300 000 tonnes a month where it was around 150 000 tonnes before Motal Engil came on board. With the new equipment that we are expecting from BML and Belaz we expect production to increase to 450 000 tonnes so this is what we call our turnaround plan,” Mr Makore said.
HCCL engaged Engil in August last year as one of its efforts of putting fresh capital into its operations in a five-year contract mining deal. The contract mining entails Mota Engil investing in capital equipment and deploying it into HCCL’s mining operations with the Portuguese company being paid an agreeable rate.
“So our turnaround plan consists of the initiatives that we were doing in terms recapitalisation, consist of bringing in Mota Engil to augment our own production, divisionalising
