HARARE – Zimbabwe Stock Exchange listed coal miner, Hwange Colliery Colliery Company Limited (HCCL) appears to have terminated negotiations with its Chinese partners for the takeover of the Hwange Coal Gasification Company (HCGC).
The coal-miner had entered into negotiations with the Chinese partner for the takeover of HCGC on a build-own-operate-transfer (BOOT) arrangement after the company apparently failed construct a new coke oven battery due to cash constraints.
This was after a feasibility study by Indian firm, Water and Power Services Consultants (WAPCOS) to assess the cost of a complete refurbishment of the old plant and the construction of a new coke oven battery indicated the cost at around $50 million.
Now negotiations for a BOOT arrangement seem to have been abandoned as well.
“The shareholders of Hwange Colliery Company Limited and members of the public are advised that the company has suspended negotiations concerning a material transaction with an undisclosed party,” said Hwange company secretary Allen Masiya in a statement today.
The company has published three cautionary statements over the last three months, indicating that it was involved in “negotiations”.
But in the coal-miner’s financial year results for the year to December 31, 2017, management said the “intended takeover of the Hwange Coal Gasification Company (HCGC) Coke Oven Battery pursuant to a BOOT agreement with its Chinese partners in HCGC was delayed,” although “engagements remain in place to ensure this is achieved given the importance to focus on high value products that enhance the company’s profitability.”
That ship appears to have sailed.
The move to revive the coke oven battery was part of broader initiatives by the group to expand and beneficiate its coal.
Part of these ‘broader plans’ included the signing, last year, of a 25-year coal-supply agreement with an independent power producer (IPP), with the IPP due to construct a coal-fired power station that would initially consume 200 000 tonnes a month of coal in three years’ time.
The coke oven battery was shut down in mid-2014 in a controlled manner in order to prevent damage to the oven furnaces.
And despite numerous interventions over many years to implement a rolling rebuild, the plant was very old and beyond its economic life. Therefore the company has invited bidders to tender for the full rebuild of the coke oven battery, by-products plant and ancillary plants or the supply of a completely new coke oven battery of the same capacity together with the by-products and ancillary plant.
Hwange Colliery, is a majority state-owned coal miner that is triple-listed on the ZSE, the Johannesburg Stock Exchange and the London Stock Exchange.
For the year just ended, HCCL narrowed its losses by 51 percent to $43, 8 million in the year to December 31, 2017, from $89, 9 million in the prior period on the back of improved output.
Revenue increased by 37 percent to $54, 5 million from $39, 9 million, which management attributed to an increase in sales volumes, which were up to 1, 2 million tonnes from 921 000 tonnes in the prior comparable period.