10% drop in coal sales hurts Hwange Colliery’s half-year profit

JOHANNESBURG (miningweekly.com) – A 10% year-on-year decline in Zimbabwe-based Hwange Colliery’s coal sales to 685 759 t has dented the company’s profitability and widened its operating loss from $7.6-million in the interim period to June 2014 to $19.5-million in the six months ended June 30.

On the back of lower coal sales, sales revenue for the six months dipped from $39.9-million in the first half of the prior year to $35.4-million in the period under review, while its after-tax loss widened from $7.9-million to $15.6-million over the same period.

Despite lower coal sales, coal deliveries to the nearby Hwange power station for the period under review increased 4% year-on-year to 409 843 t.

Similarly, hard coking coal sales increased by 14% year-on-year, from 197 342 t to 225 396 t, while Hwange posted a decrease in the coal fines and breeze sales from 154 657 t to 45 045 t over the six months.

Coke sales volumes decreased from 18 363 t achieved in the first half of 2014 to 5 475 t in the period under review, owing to the low production performance
of the toll coking arrangements.

CAPITAL EQUIPMENT DELIVERY
During the period under review, Hwange successfully took delivery and commissioned mining equipment worth $18.2-million through a facility with
PTA Bank, which was subsequently ceded to the Reserve Bank of Zimbabwe.

Delivery and commissioning of additional mining equipment worth $13-million through a line of credit from the Export and Import Bank of India was also successfully completed during the period under review.

“The board and management are diligently sourcing working capital from the local money market to inject into the operations to achieve maximum use of the newly acquired equipment,” the company held.

Hwange was, meanwhile, at “an advanced stage” of converting government debt – primarily owed to the Zimbabwe Revenue Authority – into equity.

“This will be structured through a fully underwritten rights issue and a private placement. This matter will be brought to an extraordinary general meeting for shareholder approval in due course,” it noted.

The company had also been awarded new coal concessions in the Western Areas, Lubimbi East and Lubimbi West over the six months, increasing the colliery’s life-of-mine by at least 50 years.

The focus was now on the start of field exploration work to exploit the new concessions, which enhanced Hwange Colliery’s capacity to fully support power generation projects.

“The target market for the company’s coal and coke products is the local and regional  markets. However, the thrust for the second half of the year is to diversify the markets  for coal and coke products.

“The major growth opportunities lie in the regional markets in South Africa, Zambia and the Democratic Republic of Congo,” it concluded.