Legacy debts weigh down on HCCL
HWANGE Colliery Company Limited (HCCL) continues to be heavily weighed down by legacy debts, which limit the company’s ability to realise solid profits amid the adverse impact of the prevailing exchange rate volatility.
Although the company is focused on turning around its fortunes through increased output, and investments in new capital equipment, management has noted the persistent negative impact of servicing legacy debts in an inflationary environment characterised by exchange rate fluctuations.
In its audited financial results for the year ended December 31, 2022, Hwange said despite these limitations it expects to increase underground production to 50 000 tonnes by mid-2023 taking advantage of new underground mining equipment valued at US$6 million.
The equipment received is part of a two-year US$15 million mobilisation and coal off-take agreement. Added to that, the firm said its 2023 thrust is to grow its market share of coking coal sales in neighbouring countries.
While gross profit increased by 226,20 percent from ZWL$7,10 billion prior year to ZWL$23,16 billion in inflation-adjusted terms this year, the company posted a loss of ZWL$8,6 billion for the year, and attributed this to the exchange rate impact on legacy debts. Legacy debts contributed ZWL$30,7 billion of unrealised losses in inflation-adjusted terms, it said.
To that end, advanced plans to develop dedicated solutions for the delivery of coking coal and coke products in the region are underway.
The coal mining entity highlighted that as part of efforts to increase production, it entered into an equipment mobilisation and coal off-take agreement through which it will receive new underground mining equipment valued at US$15 million over a period of two years.
“A consignment of the equipment worth US$6 million has since been received and commissioned into operation. This is expected to increase underground production to 50 000 tonnes by mid-2023,” said the company.
“Colliery has also engaged new mining contractors to open three new opencast pits to guarantee coking coal annual production of 772 000 tonnes per year.
“On the coal processing front, the mine acquired two new washing plants that will be commissioned during the second-half of 2023. The washing plants will be located near the mining areas to reduce hauling and processing costs. The development of the Option Area has started with the box-cut and mining of a portal that will lead to the underground mine.”
The new mine is expected to augment the production of coking coal from the 3 Main underground mines while coal production from the Option Area is scheduled for 2024, said the company.
On financial performance in the year under review, revenue improved by 139,76 percent from ZWL$32,42 billion in 2021 to ZWL$77,73 billion in 2022 on an inflation-adjusted basis. This was largely driven by the increase in sales tonnes, it noted.
Coal production increased by 63 percent while sales volumes increased by 45 percent compared to the prior year, said the company.
The financial results indicated that despite the remarkable increase in production and sales compared to the previous year, the underground mine section was affected by delays in the commissioning of new equipment, while the market for NPD (nuts, peas, and duff) and Duff products was depressed.
Going forward, the company intends to continue increasing coking coal production and sales, which will in turn increase capacity to discharge obligations to creditors as well as create a positive balance sheet in the medium term.-chronicle.co.zw
