Zimpapers Logo

Martin Kadzere Senior Business Reporter
ArcelorMittal South Africa has started talks with Hwange Colliery Company Limited with a view of importing coking coal from the coal miner for its steel facilities.

ArcelorMittal South Africa operations comprise of four major facilities, which produce both flat and long steel products. It holds around 10 percent stake in Hwange.

“The deal is in the context of a shareholder supporting its interest. Arcelor are looking at about 50 000 tonnes per month which can be increased with time,” a source privy to the development said last week.

Coking coal is one of the key raw materials for steel production. Hwange is looking to expand regional markets to insulate itself from the subdued demand on the domestic market and fall in global prices.

Recently, Hwange Colliery said it had signed an agreement to sell coke and coke products to global miner Glencore on a six-month trial period.

“The contract is actually for coke,” managing director Mr Thomas Makore told Reuters.

“So there is a spot purchase, they are buying stock that we have right now as well as trial of our coke products for some of their operations over a six-month period. He declined to disclose the tonnage and value of the agreement, according to the report.

Government is a majority shareholder in Hwange with 37 percent shareholding. Its major local customer is Hwange Thermal Power Station which consumes the bulk of its raw coal. It also supplies coking coal and coke products to Zambia and the DRC.

Recently, Hwange concluded two deals worth about $31 million with a regional and an international financial institution for the acquisition of the new mining equipment. The equipment, mainly for open cast mines would be commissioned next month.

Under the vendor financed deals, Hwange acquired equipment from BEML worth $13 million funded by India Exim Bank. The other batch of equipment about $18 million will come from mining equipment supplier BELAZ under the PTA Bank loan facility.

Hwange has been operating below capacity due to use of obsolete equipment resulting in production inefficiencies. It is also saddled with huge debts amounting to $160 million and this has negatively affected the company’s ability to access lines of credit.

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

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

The combined production includes contribution from Mota Engil, a Portuguese company contracted by Hwange to produce 200 000 tonnes of coal per month from its open cast operations at Chaba Mine. Mota Engil has, to date, produced close to one million tonnes.