Go Back Email this Link to a friend


Hwange Colliery Company Limited - Audited Abridged Financial Results For The Year Ended 31 December 2016

Release Date: 31/03/2017 09:54:00      Code(s): HWA     
HWANGE COLLIERY COMPANY LIMITED
(Incorporated in Zimbabwe under registration number 381/1954)
ZSE Share Code: HWA ISIN: ZW0009011934
JSE Share Code: HWA ISIN: ZW0009011934
LSE Share Code: HWA ISIN: ZW0009011934


AUDITED ABRIDGED FINANCIAL RESULTS
For the year ended 31 December 2016


CHAIRMAN'S STATEMENT

On behalf of the Board of Directors, I present the financial results of Hwange Colliery Company
Limited for the year ended 31 December 2016.

OPERATING ENVIRONMENT

The Company during the year faced serious liquidity challenges with financial institutions and
creditors unwilling to extend lines of credit. As a result, the Company's capacity utilisation was
constrained due to serious working capital challenges for purchase of spare parts and production
inputs.

FINANCIAL RESULTS

Revenue
There was a 41% decrease in revenue from US$67.5 million recorded in 2015 to US$39.9million in
2016 mainly due to a decrease in sales volumes. Cost of sales declined by 23% to US$77.7 million
compared to US$101 million recorded in 2015. Administrative costs stood at US$47.6 million
representing a 22% decrease compared to US$60.6 million recorded in 2015. Loss for the year
decreased by 22% to US$89.9 million compared to US$115 million recorded in 2015.

Cost of Sales

Cost of sales decreased by 23% from US$101 million in 2015 to US$77.7 million in 2016 largely as a
result of a huge drop in the volume of coal sales. The major elements constituting the cost of sales
were contractor costs, depreciation, electricity, fuels, oils and lubricants. Contractor costs decreased
by US$20 653 783 representing a 58% decrease.

Production Performance

Total annual coal production volumes decreased to 38%. The Mining Contractor's contribution to
production volumes decreased to 58% in 2016 from 63% in 2015. Total raw coal mined was 969 153
tonnes compared to 1 557 567 tonnes in 2015.

Statement of Financial Position

There was a 13% decrease in property, plant and equipment from US$136 million in 2015 to US$119
million in 2016. There was a revaluation of the investment property which led to a 21% increase in
investment property from US$3.7 million recorded in 2015 to US$4.5 million in 2016. Total assets
reduced to US$183 million from US$239 million. The total liabilities exceeded total assets by US$168
million. Total liabilities stood at US$350 million while total assets stood at US$183 million.

TURNAROUND STRATEGY

In the half year statement to shareholders published in September 2016, I indicated a cocktail of
measures which the Company was taking anchored on a Scheme of Arrangement with its creditors.
These measures are aimed at stabilizing operations and returning your Company to profitability. The
Company has since developed strategies and action plans to leverage its strengths not only to return
to profitability but to realize its full potential. The main focus for the Board during 2016 was to ?stop
the bleeding?, craft and implement a turnaround strategy as well as laying a solid foundation for the
Company to optimize on its full potential. The following are the key areas of strategic focus:

Creditors Scheme of Arrangement (?the Scheme?)

The Scheme is aimed at creating operating space for the company to focus and implement its
turnaround whilst at the same time addressing Creditors claims in a structured manner.

The Board hired a firm of Chartered Accountants to do a verification process of Creditor claims and
balances. Creditor balances as at 31 January 2017 shall be paid a deposit and balances remaining
shall be paid over time from cash generated from the Company's own operations, details of which
shall be more fully contained in the scheme document to be availed to all creditors. The Scheme
consists of the conversion of short term debts to medium and long term. The creditors meeting is
expected
to take place by April 2017 and once done, Shareholders shall be updated of the outcome.

Review of Contracts

The Company has initiated negotiations with major contractors to reduce contractor costs. Some
contracts have been terminated and the Company has commenced a program to resuscitate some of
its own plant and equipment to lower operating costs. The Board approved a Contracts Administration
and Procurement Policy which places strict controls on purchasing and has an authority matrix and
procedures monitored from the highest level in the organisation. This Policy goes a long way in
guaranteeing contracts integrity and ultimately value creation for the Company through a competitive
procurement process.

Opencast Production

Opencast production has been subdued due to working capital constraints and production
inefficiencies largely due to equipment configuration. As the Company's turnaround efforts gather
momentum, working capital facilities will be availed to purchase spare parts for the excavators, dump
trucks, front end loaders and processing
plants.The Company will implement a combination of outsourced and owner support and
maintenance programs to assure equipment availability and utilisation.
The focus on implementing standardized processes and systems will lead to improvements
inefficiencies productivity and growth in volumes. These efforts on increasing own production will be
complemented by the Company's mining contractor. High volume production is planned for thermal
and industrial coal to optimise on costs.

Resuscitation of underground mining operations

The Company sourced approximately $6,7million to refurbish the Continuous Miner and support
equipment necessary for the underground mining operations. The Continuous Miner had a major
break down in August 2015. The Board and Management believe that the resumption of underground
mining operations will improve both sales and profitability due to the contribution of high value coking
coal and coke to the Company's product mix. The refurbishment is expected to be completed by July
2017.

Implementation of low cost strategy

The Company's high cost structure has mainly been driven by production inefficiencies and very high
direct and indirect costs. An aggressive cost reduction program is under implementation (some
measures already implemented in 2016) results of which will be evident in the 2017 financial year.
Some of the cost reduction
measures include:
a) Reduction of managerial staff by 30%. In addition, a voluntary retrenchment programme is
underway as at the time of this statement b) From October 2016 to March 2017, management
salaries were reduced by 50% while non-managerial employees were on short time work
from October 2016 to March 2017 (two weeks in, two weeks out) with a corresponding reduction in
the wage bill by 50%.
c) Human Resources Policies have been reviewed to be in line with current market conditions and
business activity with a resultant reduction in the total cost of employment. d) The establishment of a
Contracts Administration and Procurement Policy to minimise the cost base as well as reinforcing
corporate governance.
e) Drive to improve operational efficiencies which is ongoing and to be anchored on optimisation of
the high performance work culture programme. f ) At the very least, the Company to recover the costs
in respect of services it renders in running the town.

Market

The Company's coal has a reputation for its high quality in Zimbabwe and the region. In order to
retain its customers, the Company will produce high volumes and have
readily available thermal coal and industrial coal for the manufacturing sector and tobacco farmers. In
addition, export sales of industrial and coking coal and coke will be pursued in Zambia, South Africa
and the Democratic Republic of Congo. The Company has started to promote annual supply contracts
and assure customers of product availability.


Separation of the Estates and Medical Services Divisions

Traditionally, Hwange Colliery has operated the mine, town and hospital as a single enterprise with
the resultant costs of operating the town increasing the operating cost
platform. Given the need to reduce costs, the Company will operate the Estates Division and the
Medical Services Division as stand-alone business units which will be expected to contribute to the
profitability of the main company.

Expanding social outreach

In its operations, your Company aims at preserving and sustaining the environment which is important
to our society, economy, business and people. The Company
remains committed to conduct its mining operations in an environmentally sustainable manner.

The Company's corporate social programs are targeted at health sanitation, drinking water, education
and social infrastructure development.

Proactive Corporate Governance

Your Company respects your rights as the owners of the Company. At your Company, Good
Corporate Governance should not be a lip service but a culture to be continuously driven from the top.
It should always be embedded in the Company's structures and work processes as a tool to improve
efficiencies and enhancing stakeholder confidence. The Directors believe that the introduction and
upholding of the Contracts Administration and Procurement Policy will go a long way in reinforcing
corporate discipline.

Your Company will continuously scan the business environment to adopt the best strategy and mutate
faster to match the fast-changing macro-environment. It will leave no stone unturned to make
processes lean, remove bottlenecks, sharpen its core competencies, optimize costs, diversify across
the entire value chain, and most importantly, minimize costs of production.

Team Hwange: A committed force of value creators

The Board believes that your Company's employees are its most valuable assets. The core
competence of your Company is embedded not in its machinery but in the minds and hearts of every
single member of workforce who over the years have demonstrated tremendous commitment to the
Company's cause. The Board and Management have crafted a very ambitious turnaround strategy
whose success is anchored on Team Hwange being, the Board, the entire workforce and all
stakeholders working together. Safety is a priority and all e orts will be made to create a safe working
environment always in line with industry best practice.
OUTLOOK

Whilst the financial statements reflect a negative equity position, a cocktail of short, medium and long
term measures outlined above enable the Directors to report on company affairs on a going concern
basis. Some of the measures have been implemented already and some are still work in progress.

Based on initiatives outlined above and on increasing production from both open pit and underground
mining in line with the five year strategic and turnaround plan, a
Break even result is forecast in 2017 and profitability will be achieved in 2018, increasing year by year
through to2021. The five year plan incorporates coal production
from the new mining concessions at Western Areas and Lubimbi West and takes into account
Hwange Power Station Stage 3 Expansion, the refurbishment of the small
thermal power stations at Bulawayo, Munyati and Harare and the commissioning of new Independent
Power Producer thermal power plants. Central to the increase in
profitability in the five year plan is initially the resuscitation of underground mine, replacement or
rebuild of its coke oven battery which will also supply coke oven gas as fuel substitute for diesel to
Zimbabwe Power Company's (ZPC) Hwange Power Station as well as supply of tar and benzole
products to its subsidiary Zimchem.

The medium to long term outlook of the Company looks extremely bright especially with the following
initiatives which the Board will systematically be pursuing to maximize on its full potential:- a)
Following expiry of the Build, Own, Operate and Transfer (BOOT) agreement with Hwange Coal
Gasification Company, takeover of the coke oven
battery by mid 2017 b) On the back of the 25 years' coal supply agreement with ZPC's Hwange
Power Station Stage 3 Expansion, commencement of exploration drilling,
coal reserves and resources estimation at the Western Areas coal fields in 2017 leading up to mine
development c) Commencement of exploration drilling, coal reserves and resources estimation at the
LubimbiWest coal fields in 2017 d) Exploration drilling and coal bed methane gas reserves and quality
estimation at Lubimbi East concession in 2018

Directorate

Messrs Norman Shingirayi Chibanguza and Ian Chamunorwa Haruperi resigned as Directors of the
Company on 29 February 2016 having served the Company since 11 August 2011. Mr Jemister
Chininga,who was the acting Chairman of the Company, also resigned on 13 May 2016. Mr Winston
Chitando, Mr Wencalaus Kutekwatekwa and Mrs Ntombizodwa Masuku were appointed as Board
Members on 19 May 2016. Messrs Alpheus Ngapo and Edward N. Tome were also appointed as
Board Members on 22 September 2016 and 24 March 2017 respectively.

Acknowledgement

I take this opportunity to place on record the Board of Directors sincere thanks and gratitude to the
company's creditors for their support to the Company's turnaround strategy anchored on the creditors
scheme of arrangement, details of which will be outlined in the scheme documents to be furnished to
all creditors and stakeholders.

I convey my appreciation to my colleagues on the Board for their invaluable contribution in
strengthening the Company.

I express my special thankfulness to the investors and shareholders for their belief in the Board of
Directors as well as their continued support to the Company. I assure
you of our total dedication and tireless e orts in fulfilling your expectations. Team Hwange is
committed to deliver on the turnaround strategies outlined above.
Thank you,

W. CHITANDO
BOARD CHAIRMAN

Auditor's Statement
These summary financial statements should be read in conjuction with the complete set of the audited
financial statements of Hwange Colliery Company Limited for the year ended 31 December 2016,
which have been audited by Messrs Grant Thorton Chartered Accountants (Zimbabwe). The audit
opinion on the financial statements is qualified in respect of going concern and the inclusion of the
financial results of the Company's investments in associates and the joint venture company for the
year ended 31 December 2016, which have not been audited. The auditor's report on the financial
statements is available for inspection at the Company's registered office.

The audit report includes a section on key audit matters comprising of allowance for credit losses,
revenue recognition, valuation of inventory for coal and coal related products, understatement of
payables and taxation




CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for
the year ended 31 December 2016

                                                    Note          31 December             31 December
                                                                           2016                     2015
                                                                           USD                      USD
Revenue                                                 4            39 911 465              67 576 220
Cost of sales                                                      (77 742 700)          (101 345 965)
Gross loss                                                         (37 831 235)            (33 769 745)
Other income                                                            545 008                  470 858
Other gains and losses                                                (790 000)                 (19 007)
Marketing costs                                                     (2 473 101)             (1 314 953)
Administrative costs                                                (4 758 225)            (60 628 370)
Redundancy costs                                                              -                        -)
Impairment loss                                         6                                   (4 465 881)
Operating loss before interest and tax                             (86 551 623)            (99 727 098)
Finance costs                                           7           (1 992 977)             (5 548 984)
Share of loss from equity accounted                                 (1 365 390)               ( 413 134)
investments
Loss before tax                                         8          (89 909 990)          (105 689 216)
Income tax expense/(credit)                             9                     -            (9 367 557)
LOSS FOR THE YEAR                                                  (89 909 990)          (115 056 773)
Other comprehensive income:
Share of other comprehensive income of                                         -                        -
equity accounted investments, net of tax
Other comprehensive income, net of tax                                        -                      -
TOTAL COMPREHENSIVE LOSS FOR THE                                   (89 909 990)          (115 056 773)
YEAR
Attributable loss per share
- basic 10.1                                                              (0.49)                  (0.63)
- diluted 10.2                                                            (0.49)                  (0.63)
Headline loss per share
- basic 10.3                                                              (0.48)                  (0.61)
- diluted 10.4                                                            (0.48)                  (0.61)


CONDENSED STATEMENT OF FINANCIAL POSITION
as at 31 December 2016

                                                    Note          31 December            31 December
                                                                         2016                   2015
                                                                         USD                    USD
                                                                       Audited                Audited
ASSETS
           Non current assets
           Property, plant and equipment                         11          119 261 362          136 344 524
           Investment property                                   12            4 490 000            3 700 000

           Investments accounted for using the equity            13           14 816 144           16 181 534
           method
           Intangible assets                                                     968 842            1 238 371
           Deferred tax asset                                                          -                    -
           Inventories ? non current position                    14            9 218 421           15 009 021
                                                                             148 754 769          172 473 450
           Current assets
           Stripping activity asset                              15                    -            4 849 819
           Inventories                                           16           15 228 838           29 389 463
           Trade and other receivables                           17           18 259 306           31 887 617
           Cash and cash equivalents                             19              340 024             506 360
                                                                              33 864 168           66 629 529
           Total assets                                                      182 618 937          239 102 979
           EQUITY AND LIABILITIES
           Capital and reserves
           Share capital                                         20            45 962 789           45 962 789
           Share premium                                                          577 956              577 956
           Non-distributable reserve                                            4 358 468            4 358 468
           Revaluation reserve                                                 39 948 518           39 948 518
           Accumulated losses                                               (258 591 953)        (168 681 963)
                                                                            (167 744 222)           77 834 232
           Non-current liabilities
           Finance lease liability                                21             700 000            3 834 644
           Borrowings                                           22.1          78 634 350           25 824 359
                                                                              79 344 350           25 659 003
           Current liabilities
           Finance lease liability                                21             377 161           17 491 624
           Borrowings                                           22.2          12 396 334            3 960 469
           Trade and other payables                               23         237 037 122          241 505 888
           Provisions                                             24          11 163 342           14 265 377
           Current income tax liability                                       10 054 850           10 054 850
                                                                             271 028 809          287 278 208
           Total equity and liabilities                                      182 618 937          239 102 979

           CONDENSED STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2016


                                                                    Non-
                                       Share     Share      distributable   Revaluation     Accumulated                Total
                                      capital   premiu          reserves       reserve           losses                USD
                                        USD          m               USD           USD             USD
                                                   USD
Balance at 1 January 2015        45 962 789     577 956        4 358 468     39 948 518      (53 625 190)         37 222 541
Total comprehensive
loss for the year                           -           -               -             -     (115 056 773)    (115 056 773)
Balance at 31 December
2015                             45 962 789     577 956        4 358 468     39 948 518     (168 681 963)        (77 834 232)
Balance at 1 January 2016        45 962 789     577 956        4 358 468     39 948 518     (168 681 963)          37 222 541
Total comprehensive
loss for the year                         -           -                -              -     (89 909 990)      (89 909 990)
Balance at 31 December 2016      45 962 789     577 956        4 358 468     39 948 518      (258 591 953)   (167 744 222)


           CONDENSED STATEMENT OF CASH FLOWS
for the year ended 31 December 2016

                                                     Note          31 December           31 December
                                                                          2016                  2015
                                                                          USD                   USD

CASH utilised in operating activities                                (41 098 979            (1 580 956
Interest paid                                                            (19 725)            (571 910)
Tax paid                                                                        -                    -
Net cash flows utilised in operating activities                       41 118 704            (2 152 866
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of property, plant and equipment                               68 642           30 804 938
Proceeds from the disposal of assets                                            -                    -
Net cash flows utilised in investing activities                          (68 642)         (30 804 938)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from borrowings                                               59 216 000           33 095 739
Repayment of borrowings                                              (18 216 000)              (43 882)
Net cash flows generated from financing                                41 000 000           32 661 857
activities
Net decrease in cash and cash equivalents                               (187 346)             (295 947)
Cash and cash equivalents at beginning of                                 465 977              761 924)
the year
Cash and cash equivalents at end of year                19               278 631                  465 977



 NOTES TO THE ABRIDGED FINANCIAL STATEMENTS
 for the year ended 31 December 2016

 1 Nature of operations and general information Hwange Colliery Company Limited is a Company
 whose principal activities include extraction,processing and distribution of coal and coal products and
 provision of health services and
 various retail goods and services. Its activities are grouped into the following three (3) main areas:

 i) Mining - the extracting, processing and distribution of coal and coal products.

 ii) Medical services - provides healthcare to sta members and the surrounding
 community.

 iii) Estates - the division provides properties for rental and sell retail goods and services.
 The Company is a limited liability Company incorporated and domiciled in Zimbabwe. It
 is listed primarily on the Zimbabwe Stock Exchange (ZSE), and has secondary listing on the
 Johannesburg Stock Exchange (JSE) and London Stock Exchange (LSE).

 The company's financial statements were authorised for issue by the board of directors on 24 March
 2017.

 Presentation currency

 These financial statements are presented in United States Dollars being the functional and reporting
 currency of the primary economic environment in which the Company operates.

 2 Basis of preparation
 The summary financial statements for the year 31 December 2016 have been prepared
 in accordance with IAS 34, interim Financial Reporting and in terms of Zimbabwe Storck Exchange
 (ZSE) listing rules and the Companies Act (Chapter 24:03). They do not include all the information
 required for full annual - nancial statements for the year ended 31 December 2016, which have been
 prepared in accordance with International Financial Reporting Standards. The
 financial statements are based on statutory records that are maintained under the historical cost
 convention.

 3 Summary of accounting policies

 3.1 Overall considerations
 The financial statements have been prepared using the measurement bases specified by IFRS for
 each type of asset, liability, income and expense. The measurement bases are more fully described
 in the accounting policies below:

 3.2 Investment in associates and joint ventures
 Investments in associates and joint ventures are accounted for using the equity method.

 The carrying amount of the investments is increased or decreased to recognise the Company's
 share of the pro- t or loss and other comprehensive income of the associate or joint venture. These
 changes include subsequent depreciation,amortisation or impairment of the fair value adjustments of
 the assets and liabilities.

 Unrealised gains/losses on transactions between the Company and its associates or joint ventures
 are eliminated to the extent of the Company's interest in those entities. Where unrealised losses are
 eliminated, the underlying asset is also tested for impairment.

 3.3 Revenue recognition
 Revenue comprises revenue from the sale of goods and the rendering of services. Revenue is
 measured by reference to the fair value of consideration received or receivable by the Company for
 goods supplied and services provided, excluding sales taxes, rebates, and trade discounts.

 3.4 Operating expenses
 Operating expenses are recognised in pro- t or loss upon utilisation of the service or at the date
 of their origin. Expenditure for warranties is recognised and charged against the associated provision
 when the related revenue is recognised.

 3.5 Finance costs
 Finance costs are reported on an accrual basis using the effective interest method.


 4 Revenue
                                                                      2016                    2015
                                                                       US$                     US$
Mining                                                           32 27 013              57 996 532
Medical Services                                                   561 763                 999 131
Estates                                                          7 075 689               8 610 557
                                                                39 911 465              67 576 220

 5 Segment reporting
 For management purposes, the Company is organised into divisions based on its products and
 services and has three reportable segments, as follows:
 -The Mining Division, which mines and sells coal and coal products;
 -The Medical services Division, which provides medical services; and
 -The Estates Division, which leases property owned by the company.

 No operating segments have been aggregated to form the above reportable operating
 segments.
 Management currently identifies the Company's three business lines as its operating
 segments.These operating segments are monitored by the Company's Board of Directors and
 strategic
 decisions are made on the basis of adjusted segment operating results.

 The Company's revenues from external customers are divided into the following geographical
 areas:




                                                                    2016                2015
                                                                     US$                 US$
Sales within Zimbabwe                                         38 619 198          62 246 558
Sales elsewhere in Sub-Saharan Africa                          1 292 267           5 329 662
Total revenue                                                 39 911 465          67 576 220

 6.Impairment loss

                                                                    2016                2015
                                                                     US$                 US$
Impairment of coke oven battery                                        -           3 648 127
Impairment of motor vehicles                                           -               2 000
Impairment of ERP software and Mining rights                           -             118 734
Impairment of plant and machinery                                      -             697 020
Total Impairment loss                                                  -           4 465 881

 7 Finance costs

                                                                     2016               2015
                                                                      US$                US$
Interest on loans and overdrafts                                1 872 844          3 445 250
Interest on leases                                                120 113          2 103 734
                                                                1 992 977          5 548 984
 8 Loss before tax
 Loss before tax for the year has been arrived at after charging the following:


                                                                   2016                 2015
                                                                    US$                  US$
Allowance for credit losses                                  10 787 450            2 008 114
Amortisation                                                    269 530              240 641
Annual licence fees - mining rights                             248 430                    -
Audit fees                                                       97 399              146 150
Depreciation on property, plant and equipment                17 035 805           16 707 109


Directors emoluments:                                             2016                 2015
                                                                    US$                  US$
- Executive Directors                                           327 451               54 827
- Non-Executive Directors                                       113 827              228 149
Employee benefits expense                                    28 466 494           41 777 078
Impairment loss on assets (notes 6)                                   -            4 465 881
Impairment loss on stripping activity asset (note 15)         4 849 819                    -

Loss on disposal of assets                                      149 499                    -
Retrenchment package                                          2 020 787                  -
Zimbabwe Revenue Authority investigation penalty                      -         28 491 916




9 Income tax expense

                                                                   2016                 2015
                                                                    US$                  US$
 Current tax                                                          -                    -
 Deferred tax                                                         -            9 367 557
 Income tax expense                                                   -            9 367 557


 10 Loss per share
                                                                  2016                 2015
                                                                   US$                  US$
 Loss attributable to shareholders                         (89 909 990)       (115 056 773)
 Weighted average number of ordinary shares in             183 720 699          183 720 699
 issue
 Basic loss per share                                             (0.49)              (0.63)


 10.1 Basic

 Basic loss per share is calculated by dividing the loss attributable to shareholders by the
 weighted average number of ordinary shares in issue during the year, excluding the average number
 of ordinary shares purchased by the Company and held at treasury shares.

10.2 Diluted For diluted loss per share the weighted average number of ordinary shares in issue is
adjusted to assume conversion of all dilutive potential ordinary shares. The Company has one
category of dilutive potential ordinary shares being share options granted to employees.

The loss used in the calculation of all diluted loss per share measures are the same as those for the
equivalent basic loss per share measures, as outlined above.

                                                                           2016                  2015
                                                                            US$                   US$
Loss used to determine diluted loss per share                       (89 909 990)         (115 056 773)
Weighted average number of ordinary shares in issues
                                                                    183 720 699            183 720 699

Diluted loss per share                                                     (0.49                  (0.63)


10.3 Headline loss per share

Headline loss per share excludes all items of a capital nature and represents an after tax amount. It is
calculated by dividing the headline loss shown below by the number of shares in issue during the
year:
                                                                          2016                  2015
                                                                           US$                   US$
IAS 33 - Loss for the year                                         (89 909 990)         (115 056 773)
Non - recurring items:
Proceeds on sale of scrap                                              (12 312)                (50 463)
Impairment of property, plant and equipment                                   -              4 465 881
Retrenchement costs                                                  2 020 787                        -
Tax effect of the above                                              ( 517 182)            (1 136 970)

Headline loss                                                      (88 418 697)         (111 778 325)
Weighted average number of ordinary shares in issue                183 720 699            183 720 699
                                                                         (0.48)                 (0.61)
Headline loss per share
10.4 Diluted headline loss per share
Loss used to determine diluted headline loss per share             (88 418 697          (111 778 325)
Weighted average number of ordinary shares in issue                183 720 699            183 720 699
Diluted headline loss per share                                          (0.48)                 (0.61)

11 Property, plant and equipment
                                                                   136 344 524            129 078 977
Carrying amount at the beginning of the year
Additions                                                               102 142            32 680 228
Charge to profit or loss                                                      -           (4 360 425)
Disposals                                                           (1 075 367)                     -
Impairment                                                                    -           (4 347 147)
Depreciation                                                       (17 035 805)          (16 707 109)
Depreciation of disposals                                               925 868                     -

Carrying amount at the end of the year                             119 261 362            136 344 524

12 Investment property
Valuation at 1 January                                               3 700 000              3 700 000
Fair value gains (included in other gains and losses)                  790 000                      -
Valuation at 31 December                                             4 490 000              3 700 000
The following amount has been included in other income
in the pro- t and loss:
Rental income                                                          407 193                336 303
13 Investments accounted for using the equity method
Investments in associates                                               63 113                231 148
Investments in joint venture                                        14 753 031             15 950 386
                                                                    14 816 144             16 181 534
13.1 Investments in associates
Carrying amount as at 1 January                                         231 148               446 205
Share of loss                                                         (168 035)             (215 057)
Share of other comprehensive income                                           -                     -
Dividends paid                                                                -                     -
Carrying amount as at 31 December                                        63 113               231 148


The Company holds a 49% voting and equity interest in Clay Products (Private) Limited. Hwange
Colliery Company Limited also holds a 44% voting and equity interest in Zimchem Refineries (Private)
Limited. The investments are accounted for under the equity method.

The Company did not recognise its share of losses for the year amounting to USD 619 247 (2015:
USD 608 355) for Zimchem Refiners (Private) Limited as the share of cumulative losses exceed the
carrying amount of the investment in the associate. Unaudited financial information for the associates
have been included in these summary financial statements as the audited financial information was
not available.

                                                                         2016                  2015
                                                                          US$                   US$
13.2 Investment in joint venture Carrying amount as at 1
January                                                            15 950 386            16 148 463
Additional investment                                                        -                    -
Share of loss                                                      (1 197 355)            (198 077)
Dividends paid                                                               -                    -
Carrying amount as at 31 December                                  14 753 031            15 950 386

Hwange Coal Gasification Company (Private) Limited is the only jointly controlled entity and the
ultimate ownership interest is 25%. Hwange Colliery Company Limited's investment in the joint
venture is being acquired on a piecemeal basis. The investment in the joint venture has been
accounted for using the equity method.


14 Inventory - non-current portion                                       2016                   2015
                                                                          US$                    US$
Balance at 1 January                                               23 325 595            25 735 845
Additions to stockpiles                                                     -                 65 385
Cost of sales                                                       (605 329)            (8 175 504)
Coal fines write down to net realisable value                    (10 683 008)                      -
Sales                                                             (1 354 247)            (2 475 635)
Coal fines- current portion (note 16)                             (1 464 590)            (8 316 574)
Balance at 31 December                                              9 218 421            15 009 201

Coal fines amounting to USD 10 638 008 were written down in 2016 (2015: USD nil)

15 Stripping activity asset                                              2016                   2015
                                                                          US$                    US$
Balance at beginning of year                                         4 849 819             7 290 468
Current year pre-stripping costs                                             -               227 825
Costs charged to cost of sales                                               -           (2 668 474)
Impairment of stripping activity assest (note 8)                   (4 849 819)                     -
Balance at end of year                                                       -             4 849 819

16 Inventories
Raw materials / consumables                                         8 656 781             9 430 728
Finished goods
- Coal                                                              4 244 693             8 447 093
- Coal fines(note 15)                                               1 464 590             8 316 574
- Coke                                                                862 774             3 195 068
                                                                   15 228 838            29 389 463

During the year ended 31 December 2016, a total of USD 995 201 (2015: USD 442 996) worth of
inventories was included in profit and loss as an expense resulting from write down of inventories to
net realisable value.

17 Trade and other receivables                                          2016                    2015
                                                                         US$                     US$
Trade receivables, gross                                           33 426 017            33 338 281
Allowance for credit losses                                      (20 539 295)            (9 751 845)
Trade receivables, net                                             12 886 722            23 586 436
Other receivables                                                   5 408 584              8 301 181
                                                                   18 295 306            31 887 617
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable
approximation of fair value. An increase in allowance for credit losses USD 10 787 450 (2015: USD 2
008 114) has been recognised.

18 Related party balances and transactions
Included in the trade receivable and trade payable balances are related party balances that resulted
from transactions that occurred between Hwange Colliery Company Limited and its related parties

Related party receivables                                                   2016                 2015
                                                                             US$                  US$
Hwange Coal Gasification Company                                        8 820 694           3 723 581
Clay Products (Private) Limited                                             9 797              53 289
Zimchem Refineries (Private) Limited                                      237 328             237 304
                                                                        9 067 819           4 014 174
Related party payables:
Hwange Coal Gasification Company                                       11 217 557             359 990
Zimchem Refineries (Private) Limited                                       37 773              44 535
                                                                       11 255 330             404 525
Transactions with Hwange Coal Gasification Company                      3 527 997           3 099 930
(HCGC)
Transactions with Clay Products (Private) Limited                           9 797                   -
Transactions with Zimchem Refineries (Private) Limited                     14 721              14 721
Loans from shareholders                                                59 216 000
Transactions with key management personnel                              3 263 907           3 897 738

19 Cash and cash equivalents
For the purposes of statement of cash flows, cash and cash equivalents include cash on hand and in
banks net of outstanding bank overdrafts.

                                                                            2016                2015
                                                                             US$                 US$
Bank and cash balances                                                   340 024             502 630
Bank overdrafts                                                          (61 393)            (36 653)
                                                                         278 631             465 977

The bank overdrafts are unsecured. The interest rate ranges between 7% to 9% per annum.

20 Share capital                                                            2016                 2015
                                                                             US$                  US$
Authorised
204 000 000 Ordinary shares of USD0.25 each                            51 000 000         51 000 000
Issued and fully paid                                                  27 559 358         27 559 358
110 237 432 Ordinary shares of USD0.25 each                             1 514 039          1 514 039
5 925 699 Ordinary shares issued under share option                    16 889 392         16 889 392
scheme
67 557 568 'A' Ordinary shares of USD0.25 each                       45 962 789         45 962 789

21 Finance lease liability

                                                                            2016                2015
                                                                             US$                 US$
Non current                                                               700 000          3 834 644
Current                                                                   377 161         17 491 624
                                                                        1 077 161         21 326 268

The finance lease liability carrying amount is disclosed as follows:
21.1 OK Zimbabwe

                                                                         2016                  2015
                                                                          US$                   US$
Long term portion                                                     700 000               700 000
Less: Short term portion                                              377 161               414 756
                                                                    1 077 161             1 114 756
Finance lease liability
Principal                                                           1 000 000             1 000 000
Accrued interest                                                       77 161               114 756
                                                                    1 077 161             1 114 756


21.2 Reserve Bank of Zimbabwe

                                                                        2016                   2015
                                                                         US$                    US$
Long term portion                                                           -             3 134 644
Short term portion                                                          -            15 081 356
Total                                                                       -            18 216 000
Balance at 1 January/Principal amount                              20 211 512            18 216 000
Interest                                                                                  1 995 512
Repayment                                                         20 211 512                      -
Interest written o by lender at settlement                        (1 995 512)                     -
Balance at 31 December                                                      -            20 211 512

In 2015, the Reserve Bank of Zimbabwe assumed the PTA finance lease facility of USD 18 216 000
which was obtained by the Company in 2015 relating to the acquisition of coal mining equipment from
Belaz. The finance lease facility was assumed by the Reserve Bank of Zimbabwe as a secured, 3
year term loan at an interest rate of LIBOR + 9% p.a. On 26 December 2016, the finance lease was
paid in full following the assumption of the loan by the Government of Zimbabwe through the Ministry
of Finance and Economic Development.

22 Borrowings

22.1 Long term loans

                                                                         2016                  2015
                                                                          US$                   US$
BancABC                                                                                  10 595 227
Export Import Bank of India (EXIM)                                13 005 760             12 879 740
Government of Zimbabwe                                            59 216 000
Zimbabwe Asset Management Corporation (ZAMCO)                     16 201 625             14 868 435
                                                                  88 423 385             38 343 402
less - current portion of long term loans                         (9 789 035)            1 923 816)
- BanABC loan restructured                                                              (10 595 227
                                                                   78 634 350            25 824 359

22.2 Short term loans

                                                                        2016                   2015
                                                                         US$                    US$
Overdrafts                                                             61 393                36 653
Agribank                                                            2 439 963             2 000 000
Current portion of long term loans                                  9 789 035             1 923 816
                                                                   12 290 391             3 960 469
As part of the ongoing restructuring plan, the Government of Zimbabwe through the Ministry of
Finance and Economic Development issued treasury bills of USD 41 million and USD 18.216 million
in settlement of the Mota Engil and RBZ/PTA Bank loan, respectively. The Government of Zimbabwe
indicated that Hwange Colliery Company should issue preference shares against these treasury bills
once due process and approvals have been sought and as such the USD 59 216 000 has been
recognised as a non-interest bearing loan in 2016.

23 Trade and other payables

                                                                         2016                   2015
                                                                          US$                    US$
Trade                                                              60 741 155            127 474 568
Other                                                             176 295 967            114 031 320
                                                                  237 037 122            241 505 888

24 Provisions

                                                                         2016                   2015
                                                                          US$                    US$
Provision for rehabilitation (note 24.1)                            6 371 883              5 726 693
Other provisions (note 24.2)                                        4 791 459              8 538 684
                                                                   11 163 342             14 265 377


24.1 Provision for rehabilitation

                                                                         2016                   2015
                                                                          US$                    US$
At 1 January                                                         5 726 693             4 893 360
Charged to profit or loss:
Additional provisions made during the year                             645 190               833 333
Amounts used during the year                                                 -                     -
At 31 December                                                       6 371 883             5 726 693

The Company has an obligation to undertake rehabilitation and restoration when environmental
disturbance is caused by the ongoing mining activities. The provision for rehabilitation costs
recognised in these financial statements relates to previously mined areas.

24.2 Other provisions                                                    2016                   2015
                                                                          US$                    US$
Death Benefits                                                      3 007 717              3 267 913
Leave pay and bonus provisions                                      1 783 742              5 270 771
                                                                    4 791 459              8 538 684
Total provisions                                                   14 265 377             10 848 723

25 Going concern
The Company is experiencing the following challenges which have an effect on its ability to continue
operating as a going concern:

25.1 Gross loss and net loss for the year
The Company incurred a gross loss for the year ended 31 December 2016 of USD 37 831 235 (2015:
USD 33 769 745) and a loss for the year of USD 89 909 990 (2015 : USD115 056 773 ). This is
attributable to a reduction in the production volumes from 1 557 567 tonnes in 2015 to 969 153 tonnes
in 2016 on the backdrop of high fixed overheads associated with the Company's operations and
cessation of contract mining in May of 2016. The losses were also a result of challenges experienced
with equipment resulting in an increase in direct costs of production without a corresponding increase
in output.
25.2 Negative equity
As at 31 December 2016, the Company's total liabilities exceeded total assets resulting in a negative
equity position of USD 167 744 222 (2015 : USD77 834 232). This is attributable to recurring losses
which eroded the capital and reserves.

25.3 Litigation cases
The Company had litigation claims brought against it during the year ended 31 December 2015 as
follows:

                                                                          2016                    2015
                                                                           US$                     US$
Value of cases for which judgement has been passed                   27 924 528             21 297 555
against the Company*
Value of cases pending judgement at the courts                       17 411 297             21 276 848
Total value of litigation cases                                      45 335 825             42 574 403


Following the Court Order dated 1 June 2016, all lawsuits against the Company and all matters as
had been set down at Court were removed from the Court Rolls. All matters involving labour, bulk of
which relate to outstanding salaries are ring fenced for payment under the scheme of arrangement.

25.4 Debt/lease covenants not met
As part of the ZAMCO loan agreement, the Company was obliged to insure all its movable assets and
stocks valued at USD 15 000 000 as part of collateral for the loan of USD 14 868 435. The Company
has not been able to insure these assets due to liquidity constraints.

The Company has been facing challenges in meeting scheduled repayments on loans and leases
owing to liquidity challenges. 25.5 Low machine availability The Company experienced low machine
availability mainly as a result of technical challenges faced in operating the equipment and indaquate
working capital.

In view of the above, the Directors have assessed the ability of the Company to continue to operate
as a going concern and are of the view that the preparation of these - financial statements on a going
concern basis is appropriate as supported by the following plans which are intended to address these
challenges:

Proposed Scheme of Arrangement
The Company has proposed to enter into a Scheme of Arrangement with creditors. The proposed
Scheme of Arrangement is aimed at creating operating space for the company to focus on its
turnaround plans without the pressure from creditors while at the same time addressing creditors
claims in a systematic manner.

The Scheme of Arrangement includes conversion of short term debts to long term and thus
restructures the Company's balance sheet and makes it attractive to financial institutions to extend
lines of credit to the Company. The creditors meeting is expected to take place by early April 2017.

Review of contractor pricing
The Company has initiated negotiations with major contractors to reduce charges. Some contracts
have been terminated and the Company has resuscitated its own plant and equipment resulting in
lower operating costs. A new contracts administration policy was implemented which places strict
controls on purchasing, has an authority matrix that requires procedures to be followed and
authorisation limits are low and monitored from the highest level in the organisation. This Policy goes
a long way in guaranteeing contracts integrity and ultimately value creation for the Company.

Production realignment and increase at open pit mining
Production has been subdued due to low working capital and the comparatively higher cycle times of
operation of the new excavators. As the Company's turnaround e orts gather momentum, working
capital facilities will be accessible which will be applied to purchase spare parts for the excavators,
dump trucks, front end loaders and processing plants.
The Company will implement a combination of outsourced support and maintenance and own support
and maintenance programs to assure equipment availability and utilisation. The focus on
implementing standardised processes and systems based on standard operating procedures will lead
to improvements in efficiencies, productivity and growth in production volumes. These e orts on
increasing own production will be complemented by the Company's mining contractor. High volume
production is planned for thermal and industrial coal. Delivery of coal to Hwange Power Station will
primarily be by conveyor belt while industrial coal will be delivered mainly by rail.

Resuscitation of underground mining operations
The Company has directed approximately USD 6.7 million towards the refurbishment of the
Continuous Miner, two shuttle cars and a new roof bolter, feeder breaker and other equipment
necessary for the underground mining operations. The Continuous Miner had a major break down in
August 2015. The Board and Management believe that the resumption of underground mining
operations will add high value and margin coking coal and coke sales to the Company's product mix.
The refurbishment is expected to be completed by July 2017.

Implementation of low cost production strategy
The Company's high cost structure was mainly driven by high costs of direct and indirect overheads.
The Directors initiated an aggressive cost reduction program in April 2016 which started with
reduction in the number of managers by 38%, salary cuts for management by 50%, short time work (
two weeks in - two weeks out ) program since October 2016 and a voluntary retrenchment process
that commenced in March 2017.

In addition, human resources policies have been reviewed and adjusted to be in line with current
market conditions and business activity resulting in an 18% reduction in the total cost of employment.
The new contract administration policy and the procurement policy allow the Company to negotiate
better prices and payment terms. Other cost inputs such as electricity have also been analysed and
energy saving measures are being implemented such as energy efficient lights and water pumping
times at the Zambezi pump station will be reduced and aligned with low tariff times during the o -peak
times.

Customer loyalty and diversification
The Company's coal has a reputation for its high quality in Zimbabwe and the region. In order to
retain its customers, the Company will produce high volumes of the sought after thermal coal and
industrial coal for the manufacturing sector and tobacco farmers. Customers will be encouraged to
keep strategic stockpiles at their premises or at the Company's coal merchants. In addition, export
sales of industrial and coking coal and coke will be pursued in Zambia, South Africa and the
Democratic Republic of Congo. The Company has started to promote annual supply contracts and
assure customers of product availability.

Separation of the Estates and Medical Services Division
Traditionally, Hwange Colliery has operated the mine, town and hospital as a single enterprise. Given
the entry of competition and the pressure to reduce costs, the Company will operate the Estates
Division and the Medical Services Division as stand-alone business units which will be expected to
declare profits to the main company. Other companies operating in Hwange which have benefitted
from the infrastructure built and maintained by Hwange Colliery will be expected to contribute to the
maintenance and development of the town infrastructure.

26 Contingent liabilities

26.1 Significant litigation cases
Litigation cases have been included in the value of cases pending judgement at the courts as fully
disclosed in note 25.3 above.

27 Events after the reporting date
At the date of approval of the financial statements on 31 March 2017 there were no adjusting events
or significant non-adjusting events that occurred between the 31 December reporting date and the
date of approval.
The Company did not declare dividends for the year ended 31 December 2016.

Annual Report and Audited Financial Statements
The annual report and audited financial statements for the year ended 31 December 2016 will be
distributed to Shareholders on or before the Annual General Meeting which will be held on 30 June
2017.

By Order of the Board
A. MASIYA COMPANY SECRETARY
24 March 2016


REGISTERED OFFICE
7th Floor, Coal House
17 Nelson Mandela Avenue
Harare
ZIMBABWE


Financial Advisor
CBZ Holdings
Sponsoring Broker
BANC ABC Stockbrokers


www.hwangecolliery.net

Directors: W. Chitando (Chairman), S. T. Makore (Managing Director), W. T. Kutekwatekwa, N.
Masuku, J. Muskwe, A. Ngapo, E. N. Tome, V. Vera

Harare
31 March 2017

Sponsor: Sasfin Capital (A Division of Sasfin Bank Limited)

Date: 31/03/2017 09:54:00 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             . The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.


                                        
Email this JSE Sens Item to a Friend.

Send e-mail to
© 2017 SHARENET (PTY) Ltd, Cape Town, South Africa
Home     Terms & conditions    Privacy Policy
    Security Notice    Contact Details
Market Statistics are calculated by Sharenet and are therefore not the official JSE Market Statistics. The calculation/derivation may include underlying JSE data.