Africa

Zim: Hwange stalls on bailout

Ray Ndlovu

The cash strapped Hwange Colliery Company has again delayed a decision to accept a cash injection from British tycoon Nicholas van Hoogstraten.

Nicholas van Hoogstraten (left) wants an initial five-year exclusive management control of Hwange. (AFP)

The cash-strapped Hwange Colliery Company has again delayed on a decision to accept a $50-million cash injection from British tycoon Nicholas van Hoogstraten, saying that it needs more time to assess the implications of a deal that would hand over the controlling stake to Van Hoogstraten.

The structure of the proposed deal goes against the country's indigenisation laws that prescribe that all companies must be at least 51% owned by Zimbabweans.

Although Hwange has put up a brave face stalling the cash injection, it however still finds itself in a cash crunch and has not closed the door totally on Van Hoogstraten's funding offer.

Farai Mutamangira, chairman of HCC, said the board of directors was currently in negotiations with one of its major shareholders, Willoughbys Consolidated, for a $50-million facility that should be finalised by the second quarter of 2014.

Government, itself battling a liquidity crisis, is unlikely to inject any new capital into Hwange, which it owns 37% of.

Tough terms
Through his investment vehicle, Willoughby's Consolidated, Van Hoogstraten wants an initial five-year exclusive management control of Hwange.

Economist John Robertson said Van Hoogstraten is just trying to ring-fence his investment.

"It's clear that Van Hoogstraten realised that they were going to make a loss and are so deeply in debt and it is no surprise that the terms are tough, so he has to ensure that he gets his money back.

"The clause that places the HCC under his management for five years may be what the company needs for a turnaround, but would certainly have caught the government's eye and as far as they would be concerned he (Van Hoogstraten) is asking for too much, and the state would not be keen to lose control of the mining company for that long a period."

In its latest financial results for the year ending December 2013, released on Monday, the company indicated that it was in the red and had made a loss of nearly $31-million. Turnover of the period under review declined to $71.5-million compared to $104.2-million achieved in 2012.

Mutamangira said the severe loss was attributed to several factors, among these a severe liquidity crunch and obsolete equipment used by the coal miner.

"The low performance was driven by a number of critical factors worth noting. The production volumes were low consequent to the old equipment, the reduction in coal and coke prices both local and export, the increase in already high fixed overhead costs, the rising input costs, the impact of the legacy debts on current cash flows and the absence of facilities for working capital," he said.

Revenue also declined as a result of export sales of coke and breeze falling by 57%, because of the shutdown of operations of its coal clients in the Democratic Republic of Congo and the increase of cheaper coke imports from China.


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