Chronicle Editor
Oliver Kazunga, Senior Business Reporter
GOVERNMENT has appealed to the Supreme Court following the refusal by the High Court in February this year to confirm Hwange Colliery Company Limited’s reconstruction order, which saw the firm being placed under administration in 2018.
The troubled mining company was placed under administration in terms of the Reconstruction of State-Indebted Companies Act. In a statement accompanying HCCL financial results for the full year ended December 31, 2019, the company’s administrator Mr Bekhitemba Moyo said on 12 February 2020, the High Court refused to confirm the Reconstruction Order as it found, inter alia, that the 2024 scheme of arrangement with creditors subsisted at the time of reconstruction order and “should be allowed to run its course.”
Government, which is the major shareholder in HCCL, placed the firm under administration taking note of the persistent losses over a long period of time, negative cashflow, obsolete and antiquated plant and equipment as well as technical insolvency with liabilities exceeding assets.
The placement of HCCL under administration was also informed by the company’s non-payment of creditors as they fell due and non-payment of employees salaries over a long time.
Mr Moyo said following the refusal by the High Court to confirm the colliery’s reconstruction order, Government through the Ministry of Justice, Legal and Parliamentary Affairs has since approached the Supreme Court.
“On 27 February 2020, the Minister (Justice, Legal and Parliamentary Affairs) appealed against this decision to the Supreme Court and as such administration continues as normal,” he said.
In 2017 HCCL creditors voted in favour of the scheme of arrangement, which was expected to be the starting point for the company to settle its $352 million debt
Between 2015 and 2016, the colliery was faced with a myriad of litigations and writs of executions as its revenue base shrunk from $67 million to $39 million.
Workers had also taken the company to court demanding judicial management as an option citing a string of mismanagement and corruption allegations against the top executives.
At the time the company had not paid workers for several months.
Meanwhile, in the financial year ended December 31, 2019, HCCL overall output remained subdued. However, the firm recorded a 27 percent increase in coal production without the involvement of a contractor, Mota Engil.
“It was encouraging to note that own production increased by 27 percent during the period under review, despite the overall production decreasing by 43 percent mainly as a result of contractor production, which decreased by 75 percent,” said Mr Moyo.
He said over time, less reliance should be placed on contractors with own mining being a priority as it is cheaper and basically more reliable. The major challenge in achieving increased output is largely due to lack of financial and human capital.
Mr Moyo said the company will therefore continue to prioritise own mining going forward. Open cast operations without the involvement of the contractor at JKL Mine produced 449 454 tonnes in 2019, which was an increase of 22 percent from 2018 production of 366 959 tonnes.
Production by the contractor at Chaba Mine dropped by 75 percent from 1,2 million tonnes in 2018 to 306 825 tonnes in 2019. As a result overall opencast mine production in 2019 was 52 percent below that of 2018.
This was mainly attributable to low contractor activity and working capital challenges, shortages of diesel in the market and foreign currency to buy spares and explosives.
The underground operation at 3 Main Mine produced 268 603 tonnes in 2019, which was an increase of 37 percent from 2018 production of 196 060 tonnes.
The increase was attributable to improved operational funding support and the credit facility availed by the major original equipment manufacturer, Komatsu South Africa, which has been working well.
The production figures were however below the 2019 annual target of 409 500 tonnes and this is attributed to a shortage of working capital and foreign currency for spares and consumables, mainly imported from South Africa.
Total coal mined by opencast operations totalled 756 279 tonnes, a 52 percent decline in production from the previous year. Total coal from HCCL pits was 449 454 tonnes, a 22 percent increase in production from 2018 while Mota Engil mined a total of 306 825 tonnes, which was a 75 percent decline in production.
— @okazunga
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