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Business Reporter
HWANGE Colliery Company Ltd has been given the nod by major shareholders to undertake a rights offer to raise funds to pay off debts, well placed sources have said.

The country’s largest coal miner has also concluded two recapitalisation transactions amounting to $31,2 million with PTA Bank and India Export and Import Bank.

For a long time the HCCL balance sheet, which is heavily laden with debts and negative working capital, has been hampering the turnaround efforts of the company. As such, the cleaning up of the balance sheet would enhance the company’s ability to mobilise lines of credit from regional and international markets, the source said.

“We are happy that the necessary approvals have been obtained from key shareholders and the exercise will be launched upon the receipt of regulatory approvals.”

Hwange managing director Mr Thomas Makore declined to comment on the developments saying: “We can’t make comments now because we are in closed period.”

Major shareholders in Hwange are the Government, which owns 37,1 percent stake; and tycoon Mr Nicholas van Hoogstraten, who owns 31 percent through different vehicles.

ArcelorMittal, the world’s leading integrated steel and mining company, owns 10 percent.

The source said the retirement of the debt would significantly reduce interest burden.

HCCL has been battling a legacy debt amounting to $160 million, accumulated since 2006, according to the management. It includes over $80 million owed to the Zimbabwe Revenue Authority and $80 million owed to trade creditors and staff salaries. The huge debt has been wiping out cash flows with the negative spiral effect of reducing the company’s production capacity by constraining working capital.

On recapitalisation, the vendor-financed deals will see HCCL acquiring mining equipment from BEML worth $13,3 million funded by India Exim Bank, the source added.

An official with the Finance Ministry confirmed that a Government guarantee for the facility has been granted. The other batch worth $18,2 million will come from BELAZ under the PTA Bank facility.

The delivery of the equipment will result in a substantial increase in production which will subsequently enhance the company’s ability to pay outstanding salaries by December.

Hwange has a salary backlog of 12 months for workers and up to 16 months for management.

“The backlog is not consecutive but cumulative months. This would be cleared by end of the second half against the backdrop of increased production and sales,” said the source.

“The new equipment will result in increased combined monthly production (including contribution from the contractor) to at least 450 000 tonnes by second half.”

HCCL contracted Mota Engil to produce 200 000 tonnes of coal monthly from its open cast operations at Chaba. Mota Engil has, to date, produced close to one million tonnes.

Mota Engil’s contribution has enabled HCCL to stabilise production while bridging the gap between the purchase of new equipment to be commissioned in May.