The Sunday Mail
>> To produce 200 000 tonnes this month
>> Expects HCCL to pay for deliveries
PORTUGUESE contractor Mota-Engil has invested more than US$24 million in mining machinery to be used in its contract coal mining project in Hwange, with indications that the firm will be able to produce the monthly targeted output of 200 000 tonnes starting October.
Hwange Colliery Company Limited (HCCL) contracted the company last year to mine coal on its behalf in a US$260 million deal.
Under the contract, Mota-Engil should produce about 2,4 million tonnes of coal annually.
HCCL floated the tender for contract mining services at its Chaba opencast mine last October because its won ageing equipment was not bringing optimum output and had become too expensive to maintain.
The company has a US$160 million debt and reportedly owes employees upwards of US$14 million. HCCL sent nearly a third of its workforce on unpaid leave, and requires more than US$175 million to recapitalise.
HCCL’s reported last week that its loss for the six months to June 30, 2014 had widened to US$7,8 million from US$3,1 million in the comparative period a year earlier.
Revenue plunged from US$40 million to US$33 million while coal deliveries to Hwange Thermal Power Station declined from 581 000 tonnes to 394 000.
Makomo Resources is now the biggest supplier of coal to the power station, digging about 300 000 tonnes monthly compared to HCCL’s 250 000.
Mota-Engil managing director Mr Blake Mhatiwa told The Sunday Mail Business that about 50 percent of the equipment has been set and operations commenced mid-July.
He said projections are that the company would meet its requirement of 200 000 tonnes monthly beginning October.
“Technically we started mining in July and we produced our first tonne of coal in August and in September we were still ramping up, but this October we will achieve our contractual production requirements of 200 000 tonnes per month.
“When doing mining like in Hwange, you have to start by doing what is called waste stripping. So in July and August we were concentrating on overburden stripping and now we have exposed the coal; that is why I am saying from October onwards we will be meeting our coal production requirements.
“The other point is that we mobilised our equipment in two phases; the first phase mobilisation constituted about 50 percent of the equipment and we have set up this equipment and is now working.
“The second phase of mobilisation is actually in progress and the machines will start work soon; that is why I am saying we should meet our coal requirements starting this month. The equipment cost US$18 million but the figure rises to approximately US$24 when factoring in transportation and excise duty at border posts,” said Mr Mhatiwa.
Overburden stripping refers to removal of soil and rock overlying mineral deposits. It differs from underground mining in which overlying rock is left in place and minerals removed through shafts or tunnels.
In most forms of surface mining, heavy equipment such as earth-movers first remove the overburden and then drag line excavators or bucket wheel excavators extract the minerals.
Mr Mhatiwa said Mota-Engil was highly liquid and should be able to execute its contractual obligations without hitches, as long as Hwange meets its side of the bargain.
“The contract is set up in such a way that they (Hwange) pay for the coal delivered to them. For instance, if we mine five tonnes, they pay for that and if we mine 200 000 tonnes, they also pay for 200 000 tonnes within 45 days of getting the delivery, according to the contract.
“So, it is not about Mota-Engil’s liquidity, it is about the capacity of Hwange to pay for the work that we do. Mota-Engil will play their part. We have sunk almost US$24 million in bringing the machines so now we have started and this September we delivered about 130 000 tonnes.
“Hwange have to play their part and pay for the coal that we have produced because we cannot keep throwing money; they have to pay for what we are doing. What we throw in is the initial mobilisation of machines,” said Mr Mhatiwa.
He said relations with Hwange were “very cordial” and Mota-Engil was keen to extend the life of the current contract which runs out in five years.
The company employs 106 people, but this will rise to 180 when all machinery is in place.
Mota-Engil operates in 20 countries in Africa, Latin America and Europe. It is also involved in construction, engineering, hydropower, roads, dams, railways, ports and underground tunnels.
In Africa, apart from Zimbabwe, Mota-Engil has a presence in Malawi, Mozambique, Angola, South Africa, Cape Verde and Ghana; and is scouting for opportunities in Namibia and Tanzania.
HCCL is expected to increase its production to 300 000 tonnes per month before year-end. It anticipates a further rise in production once it takes delivery of equipment worth US$33 million from India’s BEML. More equipment valued at US$18 million has been secured from Belaz of Belarus.
The company also plans to export coking coal to South Africa and Zambia.
The company’s managing director Mr Thomas Makore recently said with production levels of 300 000 tonnes per month and estimated monthly revenues of at least US$12 million, the company would be profitable.
Presently, Hwange has monthly revenues of about US$5 million against operating costs of US$14 million.
Government is the largest shareholder with a 37 percent stake, while British tycoon Mr Nicholas van Hoogstraten holds a 30 percent stake.
Hwange recently spurned a US$50 million cash injection by Mr van Hoogstraten, who would have assumed managerial control for five years.
Government blocked the deal saying Hwange was a national asset and could not be controlled by an individual.
