HWANGE Colliery Company (HCC’s) funding woes continued after it announced it had suspended long-standing discussions about issuing shares for cash.
It said in an announcement to the Johannesburg Stock Exchange today that after “consultations with stakeholders and professional advisors the company found it prudent to pursue a debt management plan ahead of any capital raising initiatives”.
“As such the company has suspended discussions involving the rights issue and private placement and is at advanced stages of a scheme of arrangement with creditors,” it said.
Shares in the company have collapsed 48% in the last 30 days despite a 13% improvement in thermal coal prices over the same period. Year-on-year thermal coal prices are nearly 100% higher.
In its interim results announced in October HCC said it under-performed budgeted coal production by more than 50% in the first half of this year, but added that a “transformative scheme” in which it would convert debt into financial instruments would be delivered by the year-end.
The scheme, which would have required the support of shareholders at an extraordinary general meeting, was aimed at releasing pressure on the balance sheet so the company could expand output from its Western Areas Concession, recommence underground mining, and refire its coke ovens.
Winston Chitando, who was elected chairman of HCC earlier this year, said in a statement on October 3 that he was confident the scheme would be finalised. It has been more than a year in the making, so far.
The Zimbabwean government has previously said it planned to issue treasury bills to creditors of HCC and reschedule some of its $160m in debt as it seeks to bring the coal miner back to profitability. The Zimbabwean government has a 37% stake in HCC.
HCC said in its interim figures that it had short-term obligations of nearly $88m and negative equity of about $106m which represents the amount by which its liabilities exceed its assets.
Low machinery availability and reduced working capital had constrained production and revenue. The monthly production average between January and June was 113,862 tonnes against a budget of 340,000 tonnes. Total sales was 585,689 tonnes versus a budget of 1.8 million tonnes
The company has been cutting costs. It last year retrenched about half of its junior and middle management which it expected would save it about $3.3m a year in salaries, but in the six months ended June 30, it still produced a taxed loss of $22.7m (2015: $44.1m).
Hwange warned shareholders to exercise caution in their share-dealings pending finalisation of the debt management programme.
