Zimbabwe’s largest coal miner, Hwange Colliery Company Limited (HCCL), has engaged financial services advisory firm, Brainworks Capital (Brainworks), to assist in debt restructuring and capital-raising initiatives.
HCCL, with a $310 million debt overhang, last week said it was currently engaged in negotiations with its creditors in order to come up with a mutually acceptable debt management plan.
“Pending finalisation of these discussions, shareholders and members of the public are advised to exercise caution when dealing in the company’s shares and to consult their professional advisers before dealing in the company’s shares,” HCCL said.
Brainworks chief executive George Manyere told businessdaily that his firm was contracted by the listed coal miner to come up with strategies to liquidate the debt as well as raise over $87 million through a rights issue.
“Our mandate is to restructure HCCL’s balance sheet and recapitalise the company so that it can play a critical role in reviving the economy,” he said.
This comes as people knowledgeable about events at the Zimbabwe and Johannesburg-listed coal miner said the company is also expected to use its London-listing to secure over $100 million through a bond.
Industry experts say after the capital-raising initiative, government — with 37 percent stake in HCCL followed by British business mogul, Nick van Hoogstraten, with 15 percent and Mittal Steel African investments at 10 percent — is expected to significantly raise its shareholding through a debt-equity swap.
HCCL owes the government close to $80 million arising from its tax liabilities that the company failed to remit to the Zimbabwe Revenue Authority (Zimra). The revenue liability spanned a period of six years.
Initially, the company indicated that about $40,6 million had been accrued, but an adjustment for a further $28,5 million, listed as contingent liability, was made after verification by Zimra.
This consequently consigned Zimra to a $115 million loss for the year to December 31, 2015 from a $38 million loss registered in the prior comparable period.
The mining company’s revenue declined from $83 million to $67,6 million as coal sales nosedived, thermal coal prices remained stagnant while the prices of coke also took a knock.
HCCL’s loss for last year was worsened by production constraints caused by some faulty equipment acquired from India and shortage of working capital to fully utilise the equipment.
The listed miner said coal produced last year accounted for 57 percent of total coal produced and 47 percent of total revenue earned in the year.
Overall, coal sales declined by 13 percent, as the company was haunted by frequent breakdowns of equipment and shortage of working capital to purchase consumables used in coal production.