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Vice President Phelekezela Mphoko (third from right) greets Hwange Colliery Company Ltd managing director Thomas Makore during the commissioning of the new equipment in this file photo

Business Reporter
The government is on the verge of increasing its stake in Hwange Colliery Company Limited (HCCL) significantly after the coal miner said it is at an advanced stage of converting government debt into equity.

The state was the single biggest shareholder with 37 percent stake followed by British business mogul, Nick van Hoogstraten, who had 15 percent and Mittal Steel African investments at 10 percent.

The government is set to significantly shore up its stake through a rights offer that will result in conversion of its $80 million debt into equity.

Although HCCL did not say how much the state will hold after the debt to equity conversion, it will certainly be controlling interest.

HCCL said it will also raise working capital through private placement.

The company said it was still in discussions that may lead to transactions, which may have an impact on the company’s share price.

“The contemplated transaction is a right offer. The company is at an advanced stage of converting the government debt to equity and at the same time raising working capital for the company through a private placement,” HCCL said in a statement yesterday.

HCCL owes the government about $70 million arising from its tax liabilities that the company failed to remit to the taxman, Zimra.

The revenue liability spanned a period of six years, HCCL said.

Initially, the company indicated that about $40,6 million had been accrued, but an adjustment for a further $28,5 million, listed as contingent liability, was made after verification by Zimra.

This consequently consigned Zimra to a $115 million loss for the year to December 31, 2015 from $38 million recorded a year earlier.

The mining company’s revenue declined from $83 million to $67,6 million as coal sale nosedived, thermal coal prices remained stagnant while the prices of coke also took a knock.

The coal miner’s loss for last year was worsened by production constraints caused by some faulty equipment acquired from India and shortage of working capital to fully utilise the equipment.

HCCL said coal produced last year accounted for 57 percent of total coal produced and 47 percent of total revenue earned in the year.

Overall, coal sales declined by 13 percent, as the company was haunted by frequent breakdowns of equipment and shortage of working capital to purchase consumables used in coal production.

The company has since sought the support of one of its major customers, Zimbabwe Power Company, to structure a loan facility of $7,5 million to support the coal producers working capital needs.

HCCL believes the funding will go a long way in helping it achieve its target of doubling coal production from 150,000 tonnes to 300,000 tonnes.