Hwange Colliery Company (Zimbabwe) – HY22 gross profit increased by 74% to ZWL 4.54 billion

ADMINISTRATOR’S LETTER for the six months ended 30 June 2022

OVERVIEW

The first half of 2022 operating environment was characterised by general increase in commodity prices and raw materials including diesel, explosives and equipment spares. This was partly caused by the ongoing Russia-Ukraine war which sparked global inflation and increase in interest rates. Despite challenges, the company managed to continue with operations in both production and sales throughout the period. I report the performance for the half year below.

FINANCIAL PERFORMANCE

Despite the increase in revenue, the company posted losses for the period, of ZWL 3.97 billion in inflation adjusted terms. The net loss is a result of ZWL 8 billion exchange loss on foreign legacy debts during the period under review.

The Company’s gross profit increased by 74% to ZWL 4.54 billion in inflation adjusted terms compared to same period last year. This was largely due to a combination of an increase in sales volume and regular product price adjustments in line with market value.

REVIEW OF OPERATIONS

The Company’s production increased by 52% during the period under review. The sales volumes, however increased by only 74% compared to 2021. Limited availability of spares and the general increase in prices of maintenance spares and consumables affected the operations negatively.

The strategic priorities for the Company’s half year were as follows:

a) Safety, Health, Environment and Quality

HCCL experienced a fatality free shift record as at 30 June 2022.The lost shift injury frequency rate improved due to initiatives like people focus, systems implementation and technology embracing. HCCL embraced a risk/opportunity- based approach to operations aimed at zero harm. Top risks included Acid Mine Drainage, for which an Environmental Management Plan (EMP) to manage its effects is now in place. Likewise, robust measures aimed at reducing similar incidents related to non-communicable diseases were established through a Wellness policy.

b) Open Cast Mining

Total coal mined by Opencast operations was 1 288 521 tonnes, a 55.59% increase in production from the previous year. The steady production is mainly attributed to the successful contract mining model the company has employed.

A total of 676 387 tonnes of coal was produced for Hwange Power Station and Zimbabwe Zhongxin Electrical Energy for electricity generation during the course of the year, which was 124% increase from previous year. Deliveries into the power station were however negatively affected by limited stock holding space in the power station.

c) Underground Mining

Main Underground Mine coal production was 19.49% lower than the previous year. This was mainly due to ageing underground mining equipment. The strategic plan is to have two new continuous miners within the next 18 months. This will result in the company’s underground mine reaching optimum production capacity. The first continuous miner is expected to be commissioned before end of this year.

d) Fixed and Mobile Plant

The average feed recoveries for HCCL dry screening and wet screening plants were 98% and 90% respectively. Coking coal recovery from Jig & Floatation and HMS plants was 70% of plant feed. The company needs to improve its current washing capacity, as both the HMS plant and the Jig and Floatation plant are outdated and need constant maintenance and repair. This has put pressure on the company’s limited working capital. The company intends to have modular plants and washing plant located near the mining areas within the next 24 months.

OUTLOOK

Global coal prices continue to rise amidst ongoing Russia-Ukraine conflict and the company intends to position itself to benefit from the increase in global demand for fossil energy. In this regard, the company will be focusing on coal beneficiation and improving the quality of its coal.

The company is set to receive a washing plant that will be located near mining areas. This equipment will be commissioned during the first quarter of 2023. The company has plans to build a coke battery by 2025.

ZSE LISTING

The Zimbabwe Stock Exchange suspension owing to Administration, continues

DIRECTORATE

There are no directors in place due to Administration.

APPRECIATION

I would like to express my gratitude to the administration team, management and Staff for their collective efforts and dedication to the Company.

M. SHAVA(MR)                             
ADMINISTRATOR

B.MHATIWA (MR)
MANAGING DIRECTOR

27 September 2022

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