CAPE TOWN: hwange Colliery Company realised a $115 million loss for the full-year ended December 31, 2015 widening from another loss of $38 million a year earlier after the company recognised a $69,1 million Zimbabwe Revenue Authority liability covering six years as well as a decline in production.
An amount of $40,6 million had been accrued, resulting in an adjustment of $28,5 million after a verification exercise by Zimra. It had previously been disclosed as contingent liability. Also contributing to the annual loss was a decline in production volumes from 1,8 million tonnes to 1,55 million tonnes on the backdrop of high fixed overheads as well as challenges experienced with the new equipment commissioned in June last year.
The result of this was an increase in direct costs of production without a corresponding rise in output. The company is failing to optimally utilise new equipment acquired from Belarus and India due to working capital shortages to purchase consumables.
Revenue for the period declined to $67,6 million from $83,9 million due to low sales volumes, stagnant of thermal coal prices as well as decline of coal and coke prices. Overall, sales volumes declined 13 percent. Coal production was affected by recurrent breakdowns of the equipment and inadequate working capital to support operations.
Coal supplied to power stations accounted for 57 percent of total coal produced and 47 percent of the revenue. Industrial coal was the major contributor to the revenue, contributing 45 percent although it accounted for 32 percent to overall production volumes. Coke sales, including breeze, amounted to 54 000 tonnes, lower than 80 000 tonnes in the previous year. South Africa and Zambia remain the major markets of the products.
Coals fines sales volumes amounted to 113 421 tonnes, constituting 7 and 5 percent to production and revenue respectively. Borrowings increased to $51 million from $12 million. This was due to long-term loans from Export Import Bank of India and RBZ/PTA Bank.
Hwange said debt instruments were being set up as payment guarantee to creditors owed $287,3 million. On the faulty equipment, the machines will be re-tested under full load and capacity for the period of one month.
Hwange is working on a facility from Agribank, which will enable the company to purchase consumables. In the short term, the company is working on a $7 million pre-financing facility structured through a major customer and syndicated by two financial institutions “which will give impetus to the new business plan and ensure attainment of monthly production targets of 350 000 tonnes from July 2016 onwards,” Hwange said.
The management is also working to raise $6,3 million to re-open the underground mine while a consultant had been engaged to determine whether the coke oven battery could be re-built or de-commissioned. Negotiations to terminate the Build Own Operate and Transfer agreement signed with Hwange Coal Gasification has reached an advanced stage while exploration of new concessions has started.
