Forex crisis hits Hwange underground mining

Forex crisis hits Hwange underground mining
Published: 22 June 2018
RESUMPTION of underground mining operations at Hwange Colliery Company Limited (HCCL) has been affected by the foreign currency shortages crippling the country, a report by Parliament has indicated.

In the report released last week, the Parliamentary Portfolio Committee on Mines and Energy chaired by Norton MP Temba Mliswa, recommended that the country's biggest coal miner be prioritised in the allocation of foreign currency as it was a strategic firm.

"There is unavailability of foreign currency required for importation of spare parts and production inputs such as explosives," the committee said.

"The foreign currency shortages have caused delays in the resuscitation of underground mining operations. Underground mining stopped in 2015, but was resuscitated last year because the most profitable coking coal is mined from underground and that is the same coking coal being supplied to Ziscosteel.  The foreign currency shortages also crippled open cast mining operations where low value thermal coal and industrial coal is mined," said the report.

HCCL, which is listed on the Zimbabwe Stock Exchange and whose largest shareholder is government, undertakes underground mining operations at Chaba and 3 Main Mine, which have been affected by lack of equipment.

It is also saddled by a legacy debt of $352 million, according to the report.

Other creditors include statutory creditors who are owed about $110 million.

The committee said HCCL also owed employees about $70 million in salary arrears. The report added that the staff complement of 2 048 was too high compared to a requirement of 1 000 employees.

"The major challenge faced by Hwange Colliery is that it was last capitalised in 1983. This then has resulted in obsolete plant and equipment. Furthermore, it has an inadequate monthly working capital of $5 million, with $500 000 in foreign currency being required for spare parts and production inputs," it added.

It said HCCL owns 25 percent shareholding in a company called Hwange Coal Gasification Company (HCGC) that runs a coke oven battery. The company is 75 percent owned by Chinese shareholders who are reluctant to support a takeover of the coke battery by Hwange Colliery.

"This company was set up under a built-operate-transfer arrangement for a 10-year period. Hwange Colliery has not benefited at all from this investment since it began operations in 2009," the report noted.

The report noted that as a result of the problems faced by HCCL, it has lost market share to Liberation and Zambezi Gas through the loss of coal supplies to the Zimbabwe Power Company.
- fingaz
Tags: Hwange,


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