NRZ revival to ease HCCL transport costs

THE revival of the National Railways of Zimbabwe (NRZ) is expected to help Hwange Colliery Company Limited overcome the high costs of transporting coal by road, the company said in its results ending December 2017, released on Thursday.

Hwange Colliery is a majority state-owned coal miner listed on three stock exchanges - Zimbabwe, Johannesburg, and London. In February, the NRZ took delivery of locomotives, passenger coaches and 157 wagons as part of a deal between a consortium made up of Zimbabwe's Diaspora Infrastructure Development Group (DIDG) and Transnet.

Hwange Colliery said on Thursday that working capital constraints - namely hard currency requirements largely dependent on allocations from the reserve bank - had seen the company failing to meet its production target for the year under review. It, however, said it managed to cut its loss for the year by half.

A better performance in 2017, compared to 2016, led to a 51 percent reduction in the loss for the year, to $43.8m, from $89.9m in 2016.

Revenue rose by 41 percent from $39.9m to $54.5m in 2017. This was the result of increased sales volumes from the 921 000 tonnes to 1.2 million tonnes.

Monthly production average was 110 000 tonnes compared to the budgeted monthly production of 340 000 tonnes. As a result, the company failed to meet the market demand.

Total sales tonnage was 1.3 million tonnes against a budget of 3.6 million compared to 921 627 and 3.6 million respectively recorded in 2016. Yet the company reported reduced cost of sales 32 percent, mainly as a result of a number of initiatives, including reduced labour costs due to a voluntary retrenchment exercise.

Hwange is bullish about the future, saying its strategic priorities included a production increase as well as the expected change from road transportation to rail, due to NRZ's improved capacity. In the year under review, the company also managed to bring an underground mine back into production, enhancing the company's capacity to generate export sales from coking coal. The company will develop a second underground mining section so that coking coal production doubles in 2018.

"While foreign currency remained a challenge during the year, support received from the Reserve Bank of Zimbabwe in availing foreign currency needed to import the key pieces of equipment for the underground mine is appreciated," it said.

However, Hwange Colliery announced a delay to its planned takeover of the Hwange Coal Gasification Company coke oven battery, pending a build, own, operate, transfer (boot) agreement with its Chinese partners in the project.

The company concluded an Exploration Agreement to undertake exploration and drilling of the Western Areas Concession. Thereafter, mine development will follow after securing funding for this phase, which is intended to provide a new source of coal. The life of the mine at the current open cast operations is estimated to be less than five years.

Long term supply contracts have already been signed with the Zimbabwe Power Company and an independent power producer. Bidders have been invited to tender for development of the coal bed methane resources at Lubimbi East.

As it seeks to further position itself for production increases, Hwange Colliery has also invited bidders to tender for the full rebuild of its coke oven battery, by-products plant and ancillary plants or the supply of a completely new coke oven battery of the same capacity as that closed in 2014.