JOHANNESBURG – Zimbabwe’s troubled coal producer Hwange Colliery is pinning its hopes on a strategic plan as losses widened almost 80 percent in the 2018 financial year.
Hwange, the Harare headquartered company, recorded a bruising year with losses jumping to US$78.4 million (R1.12 billion) from $43.8m in 2017. The group said the plan would help it tap into foreign currency.
“The company has put in place a mechanism to raise significant amounts of foreign currency from both exports and domestic sales,” it said. “The foreign currency will be used to fund working capital and capital projects that are required to increase production to 170 000 million tons (m/t) of HCCL (Hwange) own mining.”
Hwange said yesterday that it would continue to focus more on underground mine operations and open cast operations at its JKL pit in order to increase high-value coking coal in the product mix.
It said it aimed to enter toll coking arrangements with the available coke oven batteries in a bid to generate foreign currency from the export of coke in the medium to long term.
The construction of its own coke oven battery using the cheaper modern technology was also on the cards, the company said.
The company said it would also rein-in costs after cost of sales increased 36 percent in 2018 as a result of increased input cost, which was driven by the parallel market exchange rate used by suppliers to charge their products in real-time gross settlements.
It said it would implement a very tight cost control and working capital management system by allocating most of the cash resources towards the operations requirements.
“This will ensure that the company will only spend what it has generated. This will be achieved by ensuring that most customers will be paying up front on all their orders and also paying most creditors up front.
“This will stop the ballooning of liabilities, which has pushed the company into negative net current assets,” it said.
Production increased to 1.79m/t from the 1.2m/t recorded in 2017 and sales increased to 1.5m/t from the 1.2m/t recorded in 2017.
Hwange said that despite widening losses, there were signs of recovery “which was mainly a result of impairment of assets and stripping activity assets written off which contributed about $27m”.
It said its performance had, however, fallen short of budgetary targets resulting in the company failing to meet the market demand. Monthly production averaged 150 000 tons compared to the budgeted monthly output of 300 000 tons.
“Total sales tonnage was 1.5m/t against a budget of 3.5m/t compared to 1.2m/t and 3.6m/t respectively recorded in 2017.
Hwange was placed under reconstruction under the Reconstruction of State-Indebted Insolvent Companies Act in October last year after being technically insolvent.