HCCL in robust production strategy
Dumisani Nsingo, Senior Business Reporter
HWANGE Colliery Company Limited (HCCL) has outlined its short to medium term strategy aimed at increasing production and revenue generation by double each year until it reaches 350 000 tonnes per month.
In an interview, HCCL board chairman Mr Winston Chitando said the company’s immediate turnaround strategy was premised on ramping up its production. The company experienced a 41 percent decrease in revenue from $67,5 million recorded in 2015 to $39,9 million in 2016 mainly due to a decrease in sales volumes. Cost of sales decreased by 23 percent from $101 million in 2015 to $77,7 million in 2016 largely as a result of a huge drop in the volume of coal sales.
“Our plans are initially to ramp up production and as I indicated from the month of May we achieved
170 000 tonnes and you compare this to an average of 80 000 of last year so it’s more than double and then in June we are targeting 250 000 tonnes. Our plan is to get to 350 000 tonnes and I think that’s the main plan and in terms of increasing the production it has come up very nicely,” he said.
In its effort to ensure improved production and efficiency, the company has embarked on a programme code named project Gijima meant to identify bottlenecks and immediate actions to remedy while observing, assessing and implementing actions to improve production, productivity and machine availability. Mr Chitando said the company was also working on resuming underground mining so as to start production of coking coal. Coking coal and coke are the company’s high margin products.
“The second plan we do have is to open up underground mining production, as we talk now the continuous miner is in South Africa (for repairs) and our plans are to resume underground coking coal. I think as you may be aware coking coal is of much higher margins than the thermal and industrial coal,” he said.
Work at the underground mine stopped last year after the major mining equipment, the continuous miner broke down.
The underground mining reserves have the best quality coal and a much longer life to ensure the mine’s going concern status.
The continuous miner has been used at the underground mine for the past 10 years and about $6,3 million is needed to rehabilitate this strategic equipment. HCCL also needs about $20 million for the refurbishment of one of its strategic units, the coke oven battery.
The state-of-the-art coke oven battery, which was constructed by a British company, Otto Simon Carves in 1987, was de-commissioned in June 2014. In 2010, the oven successfully underwent corrective maintenance after being down for four months owing to shortage of coal washing medium (magnetite), which led to a shortage of clean coal stocks for the battery.
“I’m sure we will be announcing our plans on the resumption of coke production soon. I think in the next few weeks, so these are the three immediate plans in terms of increasing production but also fundamentally is to meet our obligations in terms of the scheme of the arrangement,” said Mr Chitando.
He said the company had already started the process of negotiating with a number of financial institutions to grant it loans for working capital following the successful approval of its Scheme of Arrangement.
“We are already at an advanced stage in terms of talking to a number of financial institutions for working capital support,” said Mr Chitando.
He could not be drawn into divulging the names of the financial institutions which the company was in talks with. However, information gathered by Sunday Business reveals that one of the financial institutions, which the company is courting, is Agribank.
It is understood that HCCL recently requested Zimbabwe Power Company to back its application for a $7,5 million loan from Agribank meant to double coal production to about 300 000 tonnes.
HCCL managing director Engineer Thomas Makore said the company would soon sign a contract with an international firm to carry out exploration activities at its new concessions as it forges ahead to enhance its mine lifespan. The Government granted HCCL two concessions in the Western Areas two years ago as the coal-mining giant was now facing a challenge to ensure that its mine lifespan was extended since the resources at its opencast concessions were on the verge of depletion.
The new concessions hold deposits in excess of a billion tonnes of coal consisting of both coking coal and thermal coal at Western areas and Lubimbi West while Lubimbi East has prevalence of coal-bed methane gas, giving HCCL an additional estimated life of mining above 70 years.