Business / Companies
Hwange Colliery posts a depressed set of results
22 Sep 2011 at 15:35hrs | Views
Hwange posted a depressed set of results for the 2011 interim period, showing an attributable loss of $1.5 million versus a profit of $4.5 million the prior period. The poor performance can be attributed to the increase in overhead costs against stagnant production volumes coupled with static prices of products.
Total coal sales declined 1% to 1,161,427 tonnes. HCC coal sales increased 14% to 364,688 tonnes driven by supplies to urban thermal stations while HPS coal sale declined by 10% to 688,263 tonnes as Hwange Power Station had adequate strategic stocks. Revenues thus grew 8% to $48.5 million.
Cashflows were strained on higher working capital requirements. Net gearing improved to 44.6% from 47.2% at 31 December 2010. The balance sheet was enhanced by the revaluation of property ($39.9 million) and acquisition of new mining equipment as Property Plant and Equipment grew 53% to $134.7 million. The company had a weak current ratio of 0.8x and remains hugely under capitalised.
Local demand is expected to increase as the economy continues to recover. The reopening of New Zim Steel (formerly Ziscosteel) can potentially increase local demand by approximately 30,000 tonnes a month. A feasibility plan for the coal bed methane gas exploration and extraction project is being worked on and a potential JV partner for the project has been engaged. The full cost of development is estimated at between $100 million and $500 million.
Hwange has an estimated installed production capacity of 5 million tons p.a. The anticipated regional shortage of power in the region in the next years, as well as growing local demand should see strong demand for coal and related output escalating. The main attraction for Hwange is the resource base although the under capitalisation will negatively impact on company performance in the short-term.
Total coal sales declined 1% to 1,161,427 tonnes. HCC coal sales increased 14% to 364,688 tonnes driven by supplies to urban thermal stations while HPS coal sale declined by 10% to 688,263 tonnes as Hwange Power Station had adequate strategic stocks. Revenues thus grew 8% to $48.5 million.
Local demand is expected to increase as the economy continues to recover. The reopening of New Zim Steel (formerly Ziscosteel) can potentially increase local demand by approximately 30,000 tonnes a month. A feasibility plan for the coal bed methane gas exploration and extraction project is being worked on and a potential JV partner for the project has been engaged. The full cost of development is estimated at between $100 million and $500 million.
Hwange has an estimated installed production capacity of 5 million tons p.a. The anticipated regional shortage of power in the region in the next years, as well as growing local demand should see strong demand for coal and related output escalating. The main attraction for Hwange is the resource base although the under capitalisation will negatively impact on company performance in the short-term.
Source - Imara Stockbrokers
