Poor cashflow weighs down Hwange Colliery
OPERATIONS at coal miner Hwange Colliery Company for the 2021 financial year were hampered by depressed cashflows to import spares and consumables among other challenges despite a 49,5% increase in production.
In its financial results for the year ended December 31, the coal miner said it had been affected by the exchange rate impact on legacy debts.
“Legacy debts contributed $904 million of unrealised losses in inflation adjusted terms,” Hwange Colliery revealed in its financial statement.
Operations were also negatively affected by the prevalence of the COVID-19 pandemic, depressed cashflows to import spares and consumables as well as the depressed market for NPD (nuts, peas and duff) and duff products. The coalminer‘s production increased by 49,5% during the period under review with sales volumes increasing by 39% compared to prior year.
Hwange Colliery’s revenue improved by 31% from $7,2 billion in 2020 to $9,4 billion in 2021 on an inflation-adjusted basis. This, it said, was largely driven by a combination of an increase in sales of high value coking coal and regular product price adjustments done during the year in line with market value.
The coalminer’s gross profit increased by 26% from $1,6 billion prior year to $2,1 billion in inflation adjusted terms this year. The company posted a net profit of $28,6 million during the year.
Going forward, the company is targeting to increase coking coal production and sales, which will in turn increase capacity to fulfil its obligations to creditors.
On coal production, Hwange Colliery said raw coking coal and clean coking coal sales increased by 226% from 63 294 tonnes in 2020 to 206 564 tonnes in 2021 but the coking coal sales volumes were, however, limited by washing capacity constraints which the company redressed by recommissioning a washing plant during the period.
It revealed that total coal mined by opencast operations was 1 804 663 tonnes, a 53% increase in production from the previous year.
A total of 733,102 tonnes of coal was delivered to Hwange Power Station during the course of the year, which was an increase of 11% from previous year. Deliveries to the power station were, however, negatively affected by plant challenges at the power station and limited stock-holding space.
Coal production on its three Main Underground Mine was 27% higher than the previous year, spurred by improved operational funding and credit availed by spares suppliers.
The coal miner said it had entered into an equipment mobilisation agreement for the underground mine, that will result in the company getting new underground mining equipment valued in excess of US$15 million in the next two years.
This arrangement will enable it to increase production to 50 000 tonnes per month in the second half of 2022, then 100 000 tonnes per month in the first half of 2023 and 150 000 tonnes per month in the last quarter of year 2023 compared to the current production of
15 000 tonnes per month.
Hwange Colliery revealed that opencast operations at the JKL pit will continue to be capacitated in order to increase high value coking coal in the product mix, the target being to increase production to 90 000 tonnes per month by end of 2022.
The company also engaged a new mining contractor to increase high value coking coal with a target production of 20 000 tonnes per month.
At its Chaba Mine, the company is at an advanced stage to engage a new mining contractor to increase thermal and industrial production which would result in increased monthly output by 40 000 tonnes towards the end of 2022.
The company has also engaged a contractor to resuscitate beehive coke ovens to produce high value foundry coke with high demand on the export market.
The production is targeted to commence during the first quarter of 2022, and is expected to generate about US$3,4 million in 2022.