Mining firms must put their house in order

whole first half of the year – as the counters lack fundamentals.
Questions have since been asked on why mining companies are finding it very difficult to trade in the positive despite the expected improvement of metal prices on the international market.

A look at the four companies which comprises the mining index shows that all the firms have got burning issues that shareholders are concerned with.
The four companies – Falcon Gold, Hwange, RioZim and Bindura Nickel Corporation – are facing capitalisation problems.
Bindura Nickel Corporation shareholder Mwana Africa is looking for funding to resume operations at BNC. However, last week, Mwana Africa revealed that US$10 million was available for Bindura.
BNC requires more than US$50 million to return to full capacity.
At RioZim things have not been well, they owe banks money in excess of US$50 million. However, managing director Josh Sachikonye said a strategy has been agreed with the banks to clear off the debt.

Thereafter, RioZim is expected to perform on the back of improved gold prices on the international market.
Over the past six months, Falcon has received just US$2 million from its major shareholders. Looking at its operations the amount is a drop in the ocean.
This, however, indicates that besides the issues of indigenisation that could have scared a few international investors, existing shareholders have failed to recapitalise these companies. This has ultimately affected the whole index, which only has four companies.

Coal miner Hwange has been in the news in the past month and that has affected investor confidence at the company as well as its performance on the stock exchange.
At Hwange it all started with the adjournment of the Annual General Meeting held on June 30, 2011.
Major shareholders – the Government of Zimbabwe and Messina Investments controlled by the business tycoon Mr Nicholas van Hoogstraten – stopped the meeting.

The Government controls 37 percent of the issued share capital in Hwange while Messina Investments holds about 26 percent.
The two major shareholders wanted a massive restructuring of the company’s board of directors.
The major shareholders had ordered the removal of Messrs Fortune Chasi, Shingirai Mutumbwa, Tendai Savanhu, Mrs Prisca Mupfumira and Mrs Thandiwe Mlobane, notwithstanding their tenure of office.

HCC received 10 nominations, on which shareholders were being requested to pass an ordinary resolution for their appointment.
Those nominated included Shingirai Chibhanguza, Jemmister Chininga, Chamunorwa Hauperi, Nkosilathi Jiyane, Mlawuli Manjingolo, Siphiwe Mapfuwa, Johnson Mawere, Farai Mutamangira, Lucas Nkomo and Valentine Vera.

At the AGM there were directors who had retired and were seeking re-election by rotation, offering themselves for another term. Shareholders opposed the re-election of these retired directors.
Directors seeking re-election included two independent non-executive directors Ms Rosemary Sibanda and Mr Thambani Ndlovu and Mr James Nqindi.
Government had written to the HCC company secretary that the said directors should resign at the adjourned AGM.

“Please be kindly advised that the major shareholder is requesting your resignation as the non-executive director of HCC Limited at the forthcoming AGM to be held on June 30, 2011,” read part of the letter.
The affected board members then challenged the legality of the directive.
According to the Companies Act, a resolution to remove a director requires special notice. Special notice is given for a period of 28 days.

Hwange has 10 board members, six of them independent non-executive directors.
Thereafter, the new date for the AGM was set for August 3, 2011.

As the infighting was not enough, the Hwange Colliery chairman, yesterday advised shareholders to disregard the notice for an AGM published recently.
They say the board of directors did not order the notice.

“Accordingly the notice calling for an AGM on August 3, 2011 is unlawful and a nullity. It should be ignored.
“Shareholders will be advised in due course in respect of the lawful and proper convening of the AGM,” said chairman Mr Tendai Savanhu.
Can someone tell us what is really going on at Hwange? I am sure directors should not waste much of their time throwing each other out of office but to look for funding.

Hwange has not secured adequate funding over a long period of time and recapitalisation is what is needed most at this time.
Not that other sectors are doing exceptionally well, mining counters should put their house in order because no insane investor will invest in these counters characterised by shareholder indecisiveness.
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