Zimbabwe Stock Exchange listed coal miner Hwange Colliery Company Limited (HCCL)’s tax arrears have ballooned to $69,1 million following the addition of a $28,5 million tax liability.
The company’s acting chairman, Jemmester Chininga, on Monday said HCCL had to accommodate the additional tax liability on its books following finalisation of a special exercise covering the period from 2009-2015.
The amount had previously been reported as a contingent liability. A contingent liability is a potential obligation that may be incurred depending on the outcome of a future event.
“The company is currently at advanced stages of the conversion of government debt, mainly the Zimra liability into equity. This will be structured through a fully-underwritten rights issue and private placement,” Chininga said.
This comes as the coal miner, also listed on Johannesburg and London Stock exchanges, last year proposed an $88 million rights issue to help clean its balance sheet.
Market experts say the debt-to-equity conversion is expected to improve the group’s performance.
Hwange has been struggling due to a legacy debt — which stood at $136 million in December last year after paying $60 million in the past two years to service it — that has seen it struggle for operating capital.
“The burden of servicing legacy debts continues to strain the company’s cash flows and this presented working capital challenges,” Chininga said.
Meanwhile, the group’s sales revenue for the six months to June 2015 stood at $35,4 million compared to $39,9 million recorded prior comparative period. At $19,5 million, operating loss surged on $7,6 million recorded prior comparable period.
HCCL also expects production to surge to about six million tonnes per year following the commissioning of mining equipment worth $31,2 million last week.
HCCL — currently operating at 45 percent capacity — also expects capacity utilisation to go up on the back of the new equipment.
The new equipment was acquired from Belaz and BEML under vendor-financed facilities, with the PTA Bank funding $18,2m for the purchase of the machinery from Belaz and the India Exim Bank then financed the purchase of equipment from BEML.