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Published On: Sun, Nov 16th, 2014

Zimbabwe’s Hwange Colliery plans rights issue

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HARARE — Hwange Colliery Company plans to ask shareholders for more money as Zimbabwe’s second-biggest coal producer seeks to restructure $70m in debt and struggles to pay employees because of a drop in prices.Coal+XXX+high+res

The debts arose when Zimbabwe abandoned its dollar in 2009 in favour of multiple other currencies, including the dollar and rand, to help contain hyperinflation, said MD Thomas Makore on Sunday in Hwange, 485km southwest of Harare.

“We have discussed with our major shareholders how to liquidate this debt, so we have agreed that we do a rights issue,” he said.

Formal consultation with shareholders has begun and Hwange is seeking approval for a circular from the Zimbabwe Stock Exchange, where the stock trades, Mr Makore said.

Hwange, in the western part of the Southern African nation, is Zimbabwe’s largest coal miner after Makomo Resources and a supplier of the fuel to state-owned power utility Zesa Holdings, which does not generate enough electricity for the country’s needs. The company has been held back by ageing equipment and owes its 3,200 employees about $20m in salaries for the past 13 months.

Coal producers are suffering as big companies such as Glencore raise output even after prices dipped to the lowest in five years.

Zimbabwe’s state is the biggest shareholder in Hwange, with a 37% stake. As part of the restructuring, Hwange is getting loans to buy equipment. It is finalising borrowing of $80m from the Eastern and Southern African Trade and Development Bank, known as PTA Bank, Mr Makore said.

The funds will be used to buy open-cast mining equipment from BelAZ, a Belarusian truck maker. Hwange is sourcing another $15m of equipment from BEML, a state-run Indian equipment maker, and Ravanthi, which will be financed through Export-Import Bank of India, he said.

Bloomberg

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