Sunday, May 21, 2017

Zimbabwe Government Gives Hwange Scheme Thumbs Up  
Over 80 percent creditors support deal . But van Hoogstraten has concerns

Livingstone Marufu
Zimbabwe Sunday Mail

MINES and Mining Development Minister Mr Walter Chidhakwa has come out in full support of the Scheme of Arrangement crafted by the Hwange Colliery Company Limited (HCCL) board despite concerns raised by the second-largest shareholder Mr Nicholas van Hoogstraten whose fears are that the scheme will not adequately deal with the company’s long term challenges.

Mr van Hoogstraten has since engaged Mr Chidhakwa over the issue. This is despite the fact that the Scheme of Arrangement received more than 80 percent support from creditors to enable the coal miner to convert some of its current liabilities into medium-and long-term liabilities, thus making them manageable.

A moratorium on the seizure of company assets by creditors – naturally afforded by the scheme – is expected to help the business plan its way out of the current crisis. Overall, HCCL owes more than US$352 million to its workers, suppliers and technical partners.

Minister Chidhakwa last week said besides allowing management to focus on its core business, one of the major benefits of the deal was to allow the mining house to resume underground mining operations. “The Scheme of Arrangement gives Hwange a breather and will give the management time to concentrate with the main operations of the company as the company pushes for its turnaround strategy.

“The arrangement was oversubscribed as over 80 percent of the creditors supported the move. This will enable the company to revive underground mining which it has ceased a couple of years ago. “In the next three months, the company expects to start exporting coking coal in the range of between 50 000 tonnes and 60 000 tonnes to South Africa for its smelters,” said Minister Chidhakwa.

However, the British-born business magnate, Mr van Hoogstraten thinks otherwise. “I am not in agreement with the Scheme of Arrangement at Hwange… I am not in agreement with it and I can’t tell you why but I have raised my concerns with the Minister,” said Mr van Hoogstraten. “What we have discussed with Minister Chidhakwa (about the scheme) is confidential… It’s just buying time and it’s not for long-term purposes.”

The often controversial businessman, who owns a 30 percent stake in HCCL through Messina Investments, is believed to be among the 20 percent that voted against the scheme of arrangement.

Earlier in September 2013, the key shareholder had unsuccessfully tried to foist a US$50 million bailout package on management in the fervent hope that he will be given management control of the business, which he believes is being dragged by “inept” executives.

In February last year, Mr van Hoogstraten was calling for Hwange to be put under judicial management as he argued that the company was technically insolvent.

HCCL managing director Engineer Thomas Makore told The Sunday Mail Business that though the Scheme of Arrangement has managed to stop the company from bleeding, it needs further capital injection to finance its projects.

“We are happy that the Scheme of Arrangement will now afford the company some operating space to implement its business and turnaround plans. Hwange Colliery needs short-term, medium-term and long-term working capital,” he said. “The company also needs financing for its projects to retool some of its operations with modern and more efficient equipment and technologies.

“The short-term working capital required is approximately US$15 million. For the month of May 2017, the company is targeting to achieve over 200 000 tonnes of industrial and thermal coal, which is more than double the average of last year.

“This should increase to over 300 000 tonnes by July, which will be at least a 275 percent increase from the average of 2016. In addition, the whole of last year HCCL did not produce any coking coal and coke, which are high margin products.”


HCCL will require about US$60 million to replace one of its key mining equipment, the dragline. Alternatively, the coal mining firm would have to upgrade the equipment to the tune of at least US$20 million.

Engineer Makore said: “The dragline needs a major service so that it is reliable and available to produce 50percent of its design capacity. “This crucial machine will be deployed to operations after the major service.”

The scheme of arrangement has sparked renewed optimism that Hwange’s fortune might rebound. Under the new regime, all creditors will be paid in a coordinated and well-structured manner.

Judicial management, which was mulled by some shareholders as an alternative route, has not been successful in some companies that have gone to the supposedly reconstruction process.

Over the years, Hwange faced several of litigations and court orders which granted creditors the right to acquire company’s assets to recover their money.

Negotiations with banks to finance the new plan are believed to be currently underway. The financial resources will be channelled to production activities at opencast, underground and metallurgical operations so that production volumes will increase to above break-even point.

Hwange is confident that it will continue to have an adequate supply of coal to the national electricity utility, including supplying profitable coal and coke grades to industry and export markets.

Mota Engil, which had recently downed tools over non-payment of US$41 million for supplied coal, has since resumed operations following successful resolution of the debt obligations.

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