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Hwange secures US$11m loan

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HWANGE Colliery Company Ltd has secured US$11 million from the Export-Import Bank of India for the acquisition of plant and machinery, sources familiar with the transaction said on Friday. The loan facility will bring to about US$36 million the money Hwange has spent on recapitalisation over the past three years. According to the source, the money would largely be utilised on the acquisition of shovels for open cast and drilling rigs for the mining operations.

In the past, Hwange has secured different lines of credit including the US$7 million from Zimbabwe Power Company, US$13 million from Sany of China and US$5 million from Norinco.

The board had indicated it wanted to recapitalise the company to the tune of U$40 million in the short to medium term. The source said the acquisition of the new equipment would help the country’s largest coal miner to raise production to about 250 000 per month from the current output of 140 000 tonnes by year end. All in all, the mine will produce 450 000 tonnes in addition to what the contractor is expected to produce.

In December last year Hwange Colliery signed a US$260 million mining contract with Portuguese firm, Mota-Engil.  The contract, expected to commence in April this year, will run for the next five years. Monthly production by the contractor is expected to reach 200 000 tonnes by December next year, according to Mota-Engil.

According to the agreement, Hwange Colliery would pay Mota-Engil on a set price per tonne for coal mined.
Under most contract mining agreements, the contract miner is generally responsible for providing all equipment, financing its operation, internal mine capital needs, employee salaries and benefits and all other requirements associated with an independent business.

“By year end, Hwange should be able to produce close to half a million tonnes of coal per month but with local coal supply on the rise, the company has to focus on export markets and beneficiation,” said the source.

No comment could be obtained from Hwange chairman Mr Farai Mtangamira who was said to be out of the country. Acting managing director Mr Jemester Chininga could also not be reached for a comment.

Hwange is operating below capacity, largely due to production inefficiencies associated with the use of old machinery, shortage of working capital and skilled labour force. Analysts say the company should vigorously pursue export markets in light of increased local production by other players against dwindling demand, particularly from the manufacturing sector.

The decline in capacity utilisation by most companies, especially those uses coal for energy requirements has resulted in less coal demand.
Between January and October last year, Zimbabwe’s coal miners (mainly Hwange and Makomo Resources) produced 3,81 million tonnes valued at US$155,4 million, according to the Chamber of Mines of Zimbabwe. This is significantly lower than the installed annual capacity of Hwange Colliery Company of five million tonnes.

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