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Hwange swings to $1,5bn profit

Hwange swings to $1,5bn profit

LISTED coal miner Hwange Colliery Company Limited (HCCL) swung from a loss position of $487 million to post profit after tax of $1,5 billion during the year ended December 2019, buoyed mainly by sales mix change and increased product pricing

BY FIDELITY MHLANGA

Hwange, which was placed under administration in 2018, moved from a loss of $487 million registered in 2018 to register a profit last year.

“Financial performance improved in 2019 against comparable period in 2018 despite decreased production and sales volumes. This was largely due to a change in the sales mix, which saw high value coking coal production and sales going up by 20% as well as improved product pricing. Production and sales were adversely affected by the shortage of diesel coupled with unavailability of wagons,” said the company’s administrator Bekithemba Moyo.

Revenue surged by 105% from $429 million in 2018 to $881 million in 2019 on an inflation adjusted basis largely due to a combination of an increase in high value coking coal sales as well as frequent adjustments to product prices in line with changes to the Interbank rates which were introduced in February 2019.

The company’s total assets marginally improved to $2, 97 billion from $2,91 billion during the period under review.

The mine commissioned the 18-seater personnel man carrier and reduced fatigue on underground employees advancing underground working sections so that employees no longer travel long distances in and out of the mine.

Moyo said there was a production gap of 64% in total coal mined of 1 013 932 tonnes, compared to sales potential of 2 819 298 tonnes as the market remains with a high appetite for the product as evidenced by the 2019 order book.

He said the company continues to operate cautiously during the lockdown period which commenced on March 30, 2020 as it is considered to be offering essential services according to SI 83 of 2020.

“The company’s operations were, however, affected by the pandemic as some customers and suppliers are closed due to lockdown. The company will continue to operate and is fully aware of the potential risk to the business of the pandemic until it is under control,” he said.

The company’s acting managing director Charles Zinyemba said total coal mined by open cast operations totalled 756 279 tonnes, a 52% decline in production from the previous year.
Total coal from HCCL pits was 449 454 tonnes, a 22% increase in production from 2018 while the contractor Mota Engil mined a total of 306 825 tonnes, which was a 75% drop.

Zinyemba said main underground run of mine (RoM) coal production was 37% better than the previous year, but 35,5% below the target. During the year 268 603 tonnes of RoM coal was produced against a budget of 409 500 tonnes attributable to the resuscitation of the Sandvik LHD, improving operational funding support and the credit facility that was availed by OEM (Komatsu SA), which has been working well.

A total of 554 619 tonnes of coal was delivered to Hwange Power Station during the course of the year.

During the period a total of 628 727 tonnes raw coal was processed at both Chaba and No 2 plants against a target of 1 440 000 tonnes which is 44% attainment of the target.

The company said the life of the mine at the current open cast operations is estimated to be less than five years, therefore the development of the Option Areas and Lubimbi coalfields to full-scale mining operations is critical.

It said the loss of the Western Area coalfields is now a threat to the 25 years coal supply agreement which was signed with the Zimbabwe Power Company’s Hwange Power Station Stage 3 expansion. Therefore, there is need for the company to be allocated an alternative resource to be able to fulfil the agreement which is critical to the electricity supply in the country.

The company said it was still pursuing takeover of the Hwange Coal Gasification Company (HCGC) Coke oven battery pursuant to a build-own-operate-transfer with its Chinese partners in HCGC, adding that engagements remain in place to ensure that this is achieved without placing risk on the company.

Do you have a coronavirus story? You can email us on:
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NewsDay Zimbabwe

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