Hwange Colliery incurs a $1.5 million loss

Hwange's sales revenue for the six months to 30 June 2011 was $48.6 million, 8% above the $45.2 million revenue recorded during the same period last year. The Company incurred an unaudited net loss after taxation of $1.5 million and this compared unfavourably to the $4.5 million profit recorded for the same period in 2010. This negative financial performance is attributed to the increase in overhead costs against stagnant production volumes and prices of products. The cost of short term borrowings, increase in fuel prices as well as mining contract costs impacted negatively on the Company. 
A property revaluation surplus of $39.9 million was realised for the period under review. This resulted in a total comprehensive income for the half year of $38.4 million compared to $4.5 million for the same period last year. 
Total fixed assets and investments increased to $153.8 million from $103.8 million as at 31 December 2010. This was because of the revaluation of property and acquisition of new mining equipment.
Total coal sales for the six (6) months period under review of 1 161 427 tonnes were comparable to 1 178 724 tonnes achieved during the same period last year. 
Hwange Power Station (HPS) coal deliveries to Zimbabwe Power Company (ZPC) for the period were 688 263 tonnes compared to 769 340 tonnes for the same period last year, representing a marginal decrease of 10%. Efforts were directed at supporting urban thermal power stations as Hwange Power Station held adequate strategic stocks on the ground. 
Hwange Coking Coal and Hwange Industrial Coal (HCC/HIC) coal sales increased by 14% from 319 159 tonnes for the same period last year to 364 688 tonnes achieved during the period under review. The sales increase was anchored by urban thermal power stations. 
The Company recorded a 5% increase in coke sales from 18 198 tonnes for the first half of 2010 to 18 943 tonnes for same period 2011. 
Export sales of coal to Zambia and Tanzania remained firm although logistics challenges continue. 
Hwange says the period under review was characterised by continued stabilisation of the National economy as inflation remained low and stable but the liquidity crunch affecting industry constrained normal trading activity. 
Export marketing efforts were negatively affected by the world recession that depressed demand and prices for fossil fuels in general. The demand for coke products on both the domestic and international markets remained depressed. 
Cost of freight to regional and offshore markets remained competitive against firm demand for thermal coal. Social and employment costs continued to impact negatively on the business as the mine continues to carry a municipal responsibility over Hwange Town. 
During financial year 2011 there were some strategic coal supply discussions with new potential clients such as New Zim Steel (formerly Ziscosteel). The Company`s capitalisation efforts are ongoing and business outlook is bright. 
The continued recapitalisation initiatives by the company yielded some results with the commissioning of additional mining equipment through a structured funding from a local bank. A more holistic funding programme remains outstanding. There is need to re-tool the total process flow in order to usher in volume growth and process efficiency. 
The Zimbabwe economy is envisaged to grow by 9.3% by the end of the year. The Medium Term Plan (MTP) presented by the Government of Zimbabwe priorities capacity utilisation in the manufacturing sector. There is expectation for a general increase in lending capacity of local financial institutions with competitive interest rates. These factors present some opportunities for business.