HWANGE Colliery Company Limited (HCCL) and Mota Engil have mended ties over a US$41 million debt owed to the latter for contract coal supplies.
Mota Engil Zimbabwe — a subsidiary of Portuguese-based firm Mota Engil which is involved in mining and construction — was engaged by HCCL on a five-year, renewable contract in June 2014.Through the US$260 million deal, the contractor was expected to supply 200 000 tonnes of coal per month to HCCL.
Though the company began mining in August 2014, by February 2015 it had surpassed the targeted output. Production was however, stopped in June last year over Hwange’s failure to meet its obligations. Last week, Mota Engil’s managing director Engineer Black Mhatiwa told The Sunday Mail Business on the sidelines of the Zimbabwe International Trade Fair (ZITF 2017), which ended yesterday, that working relations between the two companies are now “cordial” after HCCL amortised its debt.
“They have settled what they owed us and our relations are quite cordial at the moment. It was about US$41 million (which they owed),” said Eng Mhatiwa.
Resuming production Mota Engil has since resumed operations beginning March 1, 2017. Eng Mhatiwa said they started ramping up coal production this month and the contractual target of 200 000 tonnes a month would be achieved from July onwards.
“We started (production) on March the 1st . Fortunately we had not moved the equipment from site; all machines were on site. Only the labour (had been stopped because) we were trying to contain the costs, so we have since recalled all the 200 employees and we have started,” said Eng Mhatiwa.
As part of measures to smoothen the agreement between the two companies, Hwange has since committed to settle invoices raised each month within 30 days. Mota Engil says it is capable of producing more than one million tonnes of coal per month.
Scheme of arrangement HCCL, which is choking on a US$250 million debt (after the payment to Mota Engil), is pinning its hopes of accessing fresh working capital on a scheme of arrangement that has been thrashed out with creditors.
Hwange announced in May last year that 80 percent of its creditors — owed a combined US$166 million — had agreed to the scheme. In the short-term, the coal miner plans to ramp up production to 100 000 tonnes per month from the current 40 000 tonnes.
There are also plans to reopen the underground mine by the end of September. Discussions are currently underway for a 25-year deal to supply 400 000 tonnes of coal per month to two thermal power stations. The fortunes of the 118-year-old company reached rock bottom in August 2015 when production stopped following the breakdown of the continuous miner.