Govt to convert Hwange Colliery debt to equity Mr Mutamangira
Mr Mutamangira

Mr Mutamangira

Martin Kadzere Senior Business Reporter
GOVERNMENT will convert Hwange Colliery’s debt to the State into equity under the coal miner’s proposed $88 million rights offer meant to reduce debts and recapitalise the company.

Hwange yesterday said the company was at an advanced stage for a capital raise of $88 million from shareholders and a conditional private placement of $51 million.

“The Government will follow its rights through the conversion of debt into equity,” a source privy to the transaction said, further pointing out that it will also underwrite the exercise.

Government is the largest shareholder in Hwange with a 37 percent stake. This means Government will maintain its shareholding in the company or increase if some shareholders fail to follow their rights.

Some of the major shareholders in the company includes Mr Nicholas van Hoogstraten, who owns about 31 percent through different vehicles and Mittal Steel Africa, which owns about 10 percent equity.

The proposed rights issue and the private placement are subject to regulatory and shareholder approvals.

Hwange has been battling a legacy debt in excess of $160 million.

This debt has accumulated since 2006. It includes over $80 million owed to the Zimbabwe Revenue Authority and over $80 million owed to trade creditors and staff through salaries.

The debt has been wiping out cash flows with the negative spiral effect of reducing production capacity by constraining working capital.

“The main objective is to restructure the company’s balance sheet, complete recapitalisation programme and retire the Government and other legacy debts,” chairman Mr Farai Mutamangira said in a statement accompanying the company’s 2014 full year results.

Revenue for the period marginally rose 1 percent to $72 million from a year earlier despite increase in production and sales volumes. This was largely due to subdued prices. The loss, excluding non-recurring items decreased by 25 percent to $23,8 million.

Borrowings declined by 43 percent following the repayment of BancABC loan which left the balance at $10,6 million.

Production volumes increased by 23 percent to 1,8 million tonnes while sales volumes grew by 6 percent to 1,7 million tonnes.

Sales of coal fines rose 20 percent to 242 735 tonnes due to high demand from cement manufacturers.

Coal supplies to Hwange Thermal Station increased by 8 percent and accounted for 58 percent of sales volumes and 38 percent of revenue.

However, HCCL said it is pushing for a 20 percent price increase of thermal coal because the current price of $29 per tonne has become “unsustainable”.

“This is essentially to ensure that coal supplies to power stations remain stable,” said Mr Mutamangira.

“Hwange Colliery is of the view that this should not translate into a tariff increase as the price of our coal in relatively underpriced.”

Meanwhile, Hwange Colliery is at an advanced stage of being allocated new concessions to boost the life span of the mine and ability to attract new investment.

You Might Also Like

Comments

Take our Survey

We value your opinion! Take a moment to complete our survey