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Hwange colliery

Golden Sibanda and Enacy Mapakame

HWANGE Colliery Company Limited says it has demanded remedy for the faulty mining equipment the coal miner acquired from Bharat Earth Moving Limited of India. The faulty mining equipment, which was expected to help Hwange ramp up production, has negatively impacted output resulting in missed budgets. Chief executive Thomas Makore said yesterday the remedy should either be in the form of financial payment or replacement of equipment that is faulty.

The faulty equipment entails, mainly, excavators used in the company’s coal mining operations although the deal also included other support equipment. It was financed through a vendor financing scheme secured from India Eximbank.

The new open cast mining equipment was widely expected to increase the monthly coal output to about 500 000 tonnes from less than 200 000 tonnes.

Hwange has experienced major technical challenges with the equipment since its commissioning in July 2015 and had engaged suppliers to rectify them. All attempts, including fitting new spares to faulty areas and deploying technical experts from the supplier in India, have failed to yield desired results.

“Our operations have not been performing in terms of production. The expected increase in production due to the new equipment has not been realised.

“The major obstacle has been the excavators that we bought from India. So we have engaged the supplier. We have demanded a remedy to these technical problems because the equipment is still under warranty,” he said.

“It (the remedy) is under discussion, it could be that they replace the machines, which is what we prefer or they compensate us financially for the purchase of the equipment. The machines are (worth) about $2 million,” he added.

The Hwange CEO said that due to the equipment problems, production is at about 30-40 percent of budgeted target. The company had targeted to increase production to about 350 000 tonnes per month by September this year.

While production was low in the first half, Mr Makore said HCCL is targeting increased output in the second half, optimally utilising the old equipment.

Meanwhile, HCCL creditors will receive Treasury Bills, if they approve a scheme of arrangement that has already been sanctioned by the High Court. Mr Makore said Treasury has already acceded to issuance of the TBs.

The coal mining company owes creditors a total of $287 million, including the Zimbabwe Revenue Authority, which will convert its debt into equity.

The coal mining firm’s CEO said that Hwange will convene a creditors meeting to agree a payment plan following approval of the scheme by High Court.

“We have entered into a scheme of arrangement, it has been approved by the High Court and then we will convene a meeting with the creditors to agree on the payment plan on what we owe to all these creditors,” Mr makore said.

“The Ministry of Finance has approved Treasury Bills that will be issued by the central bank, to support the creditor payment plans, so it is a combination of debt instruments as well as payment schedule,” said Mr Makore.