HWANGE Colliery Company Limited (HCCL) has signed a contract mining deal with Chinese firm Dinson Steel, which is finalising a US$1,5 billion processing plant at Manhize.
The agreement boosts recovery efforts under six-year reconstruction schemes.
The deal, with multiple spinoffs, paved the way for Dinson to exploit hefty HCCL coalfields in northwestern Zimbabwe, where about five million tonnes — at the current extraction rate — will be mined over five years at a site referred to as the “Dinson Pits”.
HCCL embarked on the first phase of receivership in 2018, before authorities extended the reconstruction scheme in 2022 under the stewardship of mining executive Munashe Shava.
His team is currently implementing multi-million-dollar projects after pulling the 122-year-old firm from the jaws of bankruptcy.
However, as reconstruction teams worked to develop a viable recovery plan, they identified issues in HCCL’s opencast mining strategy and swiftly transitioned to full-scale contracts.
“When you are in the business of mining, the norm is to buy excavators, trucks,” acting managing director, William Gambiza told reporters during a tour of the firm’s operations in Hwange.
“But there comes a moment when you realise running the fleet will no longer be giving you any benefit, and you no longer have capacity to meet your targets.
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“The alternative is to look for someone with capacity to do it for you. We have outsourced to a company with capacity to do it on our behalf.
“We realised we unlock value if we restrict ourselves to business planning and processing. In terms of actual (opencast) mining, we are outsourcing to contractors.
“The advantage is that your unit costs (decline) and in terms of capacity you are guaranteed that they will deliver.”
Extraction costs per tonne have plummeted by about half through contract mining.
“When it comes to underground mining, we do it ourselves because it is more risky,” he added.
It appeared Dinson is building up piles of coal stocks to fire up furnaces for its five-million-tonne-a-year Manhize operation.
An executive with HCCL said it was important for the Zimbabwean outfit to take a proactive stand to guarantee Manhize enough shipments.
“Dinson, as we have said, is one of our key customers, so the coking coal that we produce from this pit is acquired by Dinson,” Gambiza said.
“This pit is scheduled to produce one million tonnes of coal per annum.”
For Manhize’s steel operation, the transaction presents opportunities to ship high quality stockpiles of coking coal ahead of its long delayed launch.
The deal is among several inked by Shava, marking a major turning point in HCCL’s journey to full scale operations after it unravelled under pressure from a sea of headwinds, which precipitated prolonged write-downs.
Bold moves by major shareholder, the government of Zimbabwe to extend administration in 2022 saved HCCL, then teetering on the brink, management and workers told businessdigest.
It was a terrifying experience, the workers said, with spouses of HCCL’s 3 000 workers stagging demos to force management to honour salary arrears.
The government understood that sending the 3 000-strong workforce home would destabilise the entire mining town and increase national unemployment rates.
A collapse of HCCL would also severely impact the nearby 920-megawatt Hwange Thermal Power Station, which sources about 30% of its coal from HCCL’s open pits.
A new underground mine, 3 Main North, is the flagship of projects lined up to power the reconstruction scheme.
A US$8,5 million coke oven battery relaunch project is underway, alongside, investments into a 360 000 tonne a year industrial coal processing facility.
Gambiza told reporters HCCL had injected US$3,2 million into a 720 000 tonne per annum coking coal wash plant, with millions earmarked to rebuild the mothballed 3 Main Mine, which delivered its first coal in 2005, before relapsing into a deadly cash guzzling machine.
The 3 Main North mine project is a US$50 million joint venture (JV) deal with Chinese investors to develop a 1,2 million tonnes per year underground mine.
The transaction will see HCCL and China domiciled Zhong Jiani Investments (ZJI) working on untapped concessions in the regional coal hotspots.
ZJI controls 77% shareholding in the JV, while HCCL holds the remaining 23%.
