admin
COAL mining giant Hwange Colliery is expecting production to increase by more than 50 percent in the third quarter of the year on the back of improved efficiency from new equipment that was acquired from Belarus and India through a $31,2 million vendor financing initiative.
In an interview on Friday, HCCL managing director Mr Thomas Makore said the anticipated increase in production would spur exports since the local market had remained subdued.
The increased exports, he said, would contribute to the turnaround of the company and help in offsetting its legacy debt of more than $160 million which includes a salary backlog.
“We are following a commissioning programme where we will have to commission the equipment before it is in operation, what we call offload commissioning and hot commissioning when we start using it and that has started. We should be able to complete that exercise by end of this month,” Mr Makore said.
Most of the equipment has arrived at the coal mine with the last batch which comprises drill rigs expected to arrive this month.
HCCL has set its sights on improving its production from 300 000 to 450 000 tonnes a month and improve on its revenue and cash flow in the process.
Production levels had dropped to below 150 000 tonnes a month and only increased following the contracting of Portuguese firm, Mota Engil to extract coal at the company’s opencast mine two years ago.
“As we commission and take over the equipment which will be done by end of this month, next month in July we should see that all that equipment is in production and then our cash cycle is after production and invoicing so we will see that in August,” Mr Makore said.
In an effort to ensure a long life span for its newly acquired machinery, the company managed to source back-up spare parts.
Over the years equipment worth millions of United States dollars ended up lying idle as the company either struggled to raise capital to purchase back-up spares or in most cases could not source the same as the manufacturers would have phased them out.
“Our approach is that we bought the equipment and we also bought the spares and we have also signed maintenance and support agreement with the suppliers of the equipment and with that set up and arrangement we should be able to fully support and service the equipment,” Mr Makore said.
HCCL has been battling a legacy debt in excess of $160 million.
This debt has accumulated since 2006. It includes over $80 million owed to the Zimbabwe Revenue Authority and over $80 million owed to trade creditors and staff through salaries.
The debt has been wiping out cash flows with the negative spiral effect of reducing production capacity by constraining working capital.
The coal mining giant has not paid its more than 2 000 workforce full salaries for almost two years, a situation attributed to low sales volumes, lack of recapitalisation to replace its obsolete machinery and a shrinking market as a result of the opening of a number of coal mines.
Government has however, promised to convert HCCL’s debt to the State into equity under the coal miner’s proposed $88 million rights offer meant to reduce debts and recapitalise the company.
“We are paying part salaries but as our sales improve and as our cash collection improves we want to increase that part payment to full salaries.
Our market in Zimbabwe is very subdued so we are very focused on increasing our exports so if we get that balance right which I anticipate we will do in the third quarter so the second half definitely which means by September-October we should be in good shape and we will be able to pay full salaries,” Mr Makore said.
Online Reporter