Hwange Colliery says it has secured two long-term coal supply contracts with Zimbabwe Power Company and Lusulu Power, an independent power producer in Matabeleland North, which are expected to increase demand for the fossil fuel by 400 000 tonnes per month.
Hwange has been hurt by low production volumes, accumulating losses of $258.6 million between 2013 and 2016, on the back of working capital constraints.
To meet the nearly 5 million tonne annual demand brought about by the two off-take deals alone, Hwange would need to attain the levels of operational efficiency the company last enjoyed in the early 1990s, when output peaked at 5.5 million tonnes.
Hwange managing director Thomas Makore said the two deals were part of initiatives to turn the ailing company around.
“We have already entered into a 25 year coal supply agreement with the two companies and we are in the process of finalising contracts,” Makore said in a statement yesterday.
The arrangement will see the company supplying more than 200 000 tonnes of coal per month to each of the two power producers.
Earlier this month, Hwange chairman Winston Chitando said lenders were unwilling to extend lines of credit to the company, whose liabilities exceed total assets by $168 million.
In 2016, raw coal production declined by 38 percent to 969 153 tonnes, from 1 557 567 tonnes in 2015.
Government, in 2015 granted Hwange three new concessions which have an estimated resource of 750 million tonnes of mainly coking coal and thermal coal in Lubimbi coalfields.- The Source