Home » Business » Hwange Colliery Considers Diversifying Revenue Streams

HWANGE Colliery Company Ltd is considering developing a 300 megawatt thermal station and to extract petrol chemicals from coal to diversify revenue streams. “Post restructuring of the balance sheet, the board and management are considering new opportunities for the company to expand into,” chairman Mr Farai Mutamangira said.

“The following projects are currently being considered a joint venture to develop a 300MW coal fired power station (and to) develop coal bed methane projects at Lubimbi.”

Mr Mutamangira said Sasol Ltd, the world’s biggest producer of liquid fuels from coal would carry out a feasibility study to explore Hwange’s “capability of producing petrochemicals.”

“The technology has been proven by Sasol and the company will carry out feasibility to explore the company’s capability of producing petrochemicals,” said Mr Mutamangira.

Hwange’s had a negative working capital position amounted to $77 million as at December 31, 2013 while the company’s total debt amounted to $172 million.

“A balance sheet restructuring exercise is at aanced stages aimed at converting some of the debts into equity and suitable debt instruments,” said Mr Mutamangira.

Hwange, the country’s largest coal producer is troubled by legacy debts and over the past two years about $35 million has been spent on servicing some of these debts.

The company remains severely constrained due to subdued capacity and the shortage of working capital. The average tonnage being produced is 200 000 tonnes per month, enough to break even.

Hwange has also come under increased competition from Makomo Resources, Coal Brick and Chilota Colliery. This competition has eaten into the market share of HCCL as it is benefiting from relatively new coal concessions with shallow coal deposits, lean cost structures and price undercutting.

However, the coal miner sees production increasing to between 450 000 and 500 000 tonnes, boosted by contract capacity.

Hwange awarded Mota-Engil of Portugal a contract to mine and the company is expected to commence operations in the second half of this year.

The contractor will produce 200 000 tonnes of coal per month. This will assure HCCL of a monthly turnover of not less than $18 million.

At this level, and assuming costs are contained below $9 million a month, HCCL will have sufficient turnover and gross margin to not only grow the business but also, to service its legacy debts.

The company will require as much as $150 million to fully recapitalise.

The markets for both coal and coke products remain fairly buoyant but characterised by intense competition.

Source : The Herald

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