Hwange board looks offshore for funding

to secure long-term funding to recapitalise the group.
He ruled out a rights offer and private placement saying management had come up with a recapitalisation strategy that they are going to adopt and implement.
Mines and Mining Development Minister Obert Mpofu said Hwange requires about US$100 million to recapitalise its oper-ations.
The coal mining company has been negotiating with the Industrial Development Corporation of South Africa for a long-term loan and the new board will continue to pursue the deal.
“Capital is the only thing dogging Hwange at the moment. We need to secure long-term loans to retool and buy new equipment.
“The company is currently operating at about 60 percent and by securing funding production should increase,” said Advocate Mutamangira. “Yes, IDC South Africa is one of the institutions which has been approach-ed.”
Hwange was at one time looking for US$75 million from the Development Bank of South Africa. Advocate Mutamangira said his new team will go through an induction course at the mine next week to familiarise themselves with the operations of the company.
Hwange has been failing to secure funding resulting in the company relying on short- term expensive facilities due to the absence of long-term funding on the market.
During the financial period ended December 2010, its current liabilities increased from US$58,3 million in the previous year to US$88,2 million. The largest chunk was from creditors and borrowings.
Last year, Hwange said its long-term recapitalisation programme was dependent on an audit of its local resources and reserves.
However, it remains to be seen if Hwange would be able to raise the required amount of money as its shareholders have not been injecting fresh capital into its operations.
The Government, with 37 percent and businessman Mr Nicholas van Hoogstraten, with 26 percent, are the major shareholders in the company.
Hwange is listed on the local bourse, Johannesburg Stock Exchange and the London Stock Exchange.
The tri-listing of the company provides management with a number of options to raise money in these diverse global markets.
Hwange has been battling to recapitalise for the past four years or more, but had been failing to do so due to a number of factors.
These include its previous weak financial position resulting in part from regulated pricing of coal on the domestic market as well as the pre-GPA hyperinflationary environment.
A planned rights issue to raise US$80 million for capital equipment hit a brick wall in 2005 after one of the major shareholders demanded that the company seek funds offshore since the projects required foreign currency.