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Hwange Colliery on a restructuring exercise

by Moyo Roy
10 Jul 2011 at 05:20hrs | Views
Zimbabwe's largest coal producer, Hwange Colliery Company Limited (HCCL) embarks on a restructuring exercise.

According to report by state controlled newspapers the shake-up is attributed to the low production level, failure to secure funding when they are seeking additional coal concessions against the backdrop of increasing competition from holders of new special coal-mining grants.

Sources say there have been holding closed-door meetings since the adjourned annual general meeting (AGM) last week between the two major shareholders - the Government and Mr Nick van Hoogstraten - that will see the ushering in of a new board.

The Government controls 37 percent of the issued share capital in Hwange while Messina Investments, owned by businessman Mr Van Hoogstraten, holds about 26 percent.

"There has been a lot of contact between Mr Van Hoogstraten and the Government with a view to do away with the bloated structure that is in place.

"They feel it is time to focus on new challenges, which require new strategies, as in any business process or re-engineering programme, the restructuring entailed the abolition of some posts, creation and/or expansion of others.

"We are going to see the reassignment of some individuals based on their proven strengths and versatility," said the source.

This development also comes after Government, the major shareholder in HCCL, wanted to remove three non-executive directors from the board as part of the restructuring of the group.

Media reports last week also say that the major shareholder wanted the three directors to resign at the AGM, after Mr Valentine Vera, who represented the Government, stopped the meeting.

At the AGM there were directors who had retired and seeking re-election by rotation, offering themselves for another term.

It is understood that the major shareholders opposed the re-election of these retired directors who were offering themselves for another term.

The directors seeking re-election included two independent non-executive directors - Ms Rosemary Sibanda and Mr Thembani Ndlovu - and Mr James Nqindi.

It is also understood that legal practitioner Mr Farai Mutamangira and two of Mr Van Hoogstraten's nominees had been touted for the new HCCL board.

Reports also say one of the major shareholders wrote to the HCCL company secretary that the said directors should resign at the adjourned AGM.

"Please be kindly advised that the major shareholder is requesting your resignation as the non-executive director of HCCL at the forthcoming AGM to be held on June 30 2011," read part of the letter. But the affected board members have challenged the legality of the directive.

According to the Companies Act, a resolution to remove a director requires special notice given for a period of 28 days. Hwange has 10 board members, six of them independent non-executive directors.

When contacted for comment, the Minister of Mines, Mr Obert Mpofu, referred all questions to HCCL company secretary Mr Thembinkosi Ncube, who promised to get back to us but had not done so by the time of going to press.

However, HCCL board chairman Mr Tendai Savanhu said they will be guided by stock exchange rules and the Companies Act on the matter since HCCL is a public company.

HCCL has been financing its recapitalisation initiatives through short-term facilities due to the absence of long-term capital on the local market.

For the financial period ended December 31, current liabilities had increased from US$58,3 million in the previous year to US$88,2 million.

The largest chunk was from trade creditors and borrowings. This shows that the company is under capital stress. Last year, HCCL said its long-term recapitalisation was dependent on an audit of its local resources and reserves.

HCCL has been in talks with development banks for possible funding. The company has been struggling to get funding since the hyper-inflationary environment. The company at one time sought US$75 million from the Development Bank of South Africa.

Source - TSM Business