Zimbabwe: Hwange Making Loss By Selling Coal for a Song

Source from:  The Herald (Harare) January 24, 2007 01/26/2007

HWANGE Colliery Company Limited is losing $6 000 per tonne of coal it produces as a result of under-pricing. HCCL public relations manager Mr Clifford Nkomo yesterday confirmed that the country's leading coal producer was selling the commodity at $2 000 per tonne against the cost $8 000 to produce a tonne. This means that the colliery is subsidising its clients including major coal consumers Zesa Holdings and Zimbabwe Iron and Steel Company, plunging the firm into viability problems. "What is of great concern is the price of coal. We produce a tonne of the commodity at $8 000, but at the end of the day we are selling at $2 000. So there is need to review the prices in line with production costs," said Mr Nkomo. He said although submissions had already been made to the relevant authorities, they were taking long to review the price. Although prices for the general coal industry were last adjusted in December, prices charged to Zesa Holdings and Zisco have not been reviewed over the past year. Mr Nkomo also said the pricing issue was also discussed at length when Minister of Mines and Mining Development Mr Amos Midzi toured Hwange to assess the situation following a major breakdown of the secondary crushing plant and conveyor belt system. The revelations also come amid reports that HCCL is not fulfilling its supply contracts with organisations such as the Tobacco Industry and Marketing Board. HCCL came under fire last week after it failed to deliver at least 100 000 tonnes of coal paid for in advance, thereby adversely affecting tobacco curing. Coal is essential for the curing of Virginia tobacco in barns for at least seven days immediately after leaves have been picked at harvesting, failure of which the quality will rapidly deteriorate. TIMB said it had only received 6 540 tonnes with the bulk still outstanding. On the other had, Zesa Holdings, one of the biggest coal consumers in the country, also complained that it was not getting enough supplies but HCCL said the failure to meet demand was a result of major breakdowns of machinery, among other operational constraints. Last week, HCCL revealed that Zesa Holdings and Zisco were failing to service their coal debts amounting to nearly $3 billion and this was exacerbating the string of problems being faced by the company. Zesa Holdings owes HCCL $2 billion while Zisco is yet to pay the colliery $800 million since October last year, although the two consumers are still getting supplies. Enditem