Wrap Text
Year end results
HWANGE COLLIERY COMPANY LIMITED
(Incorporated in Zimbabwe under registration number 381/1954)
ZSE Share Code: HCCL.ZW ISIN: ZW0009011934
JSE Share Code: HCCL.ZW ISIN: ZW0009011934
LSE Share Code: HCCL.ZW ISIN: ZW0009011934
AUDITED ABRIDGED FINANCIAL RESULTS
For the year ended 31 December 2018
ADMINISTRATOR’S STATEMENT
On behalf of the administration team, I present the audited financial results of Hwange Colliery Company
Limited for the year ended 31 December 2018.
FINANCIAL PERFORMANCE
The Company’s performance worsened in 2018 in comparison to the 2017 financial year. The loss for the
year increased by 79% from US$43.8million recorded in 2017 to US$78.4million during the year under
review.
Revenue increased by 27% from US$54.5 million in 2017 to US$69.1 million in 2018. This increase is
attributed to increased sales volume from the 1.2 million tonnes recorded in 2017 to 1.5 million tonnes in
2018.
PERFORMANCE
The financial performance was poor against comparable period in 2017 despite increased production and
sales volumes mainly as a result of the impairment of some assets as well as subdued coal prices against
increased input costs. The company’s performance for the period under review also fell short of
budgetary targets. This was due to low production levels attributable to working capital constraints.
Monthly production average was 150,000 tonnes compared to the budgeted monthly production of
300,000 tonnes. As a result, the Company failed to meet the market demand.
Total sales tonnage was 1,522,209 tonnes against a budget of 3,541,860 compared to 1,288,485 and
3,607,799 respectively recorded in 2017. Cost of sales increased by 36% as a result of increased input
cost which was driven by the parallel market exchange rate that was being used by most suppliers to
charge their products in RTGS.
REVIEW OF OPERATIONS
As demonstrated by the improved sales and production volumes, there are signs of recovery despite the
widening of the loss position which was mainly a result of impairment of assets and striping activity assets
written off which contributed about $27m. The strategic priorities for the Company’s year-end were the
following;
a) Increased Production and Sales.
During the year under review, the Company focused on increasing production and sales. Production
increased to 1.79 million tonnes from the 1.2 million tonnes recorded in 2017 and sales increased to 1.5
million tonnes from the 1.2 million tonnes recorded in 2017.
b) Open Cast Mining
The Company’s own open cast operation contributed 366,959 tonnes for the year which represents 20%
of the total year end production and the contractor operation contributed 1,220,859 tonnes for the year
which represents 68% of the total year end production. There is need to increase own production to over
50% of total production going forward. There were constraints in the logistics and processing section of
the value chain which are being addressed. Coal movement was largely by road which is an expensive
mode of transportation. The revival of the National Railways of Zimbabwe and our own conveyor belt to
the power station will come as a solution to the logistical requirements for the product to reach to
customers in a cost-effective way. Efforts continue to be made to secure working capital.
c) Optimization of Underground Mine Operations
The Company continued to optimise underground mine operations and managed to do over 35 000
tonnes for the best month and the aim is to increase production to 50 000 tonnes per month. While the full
production of the underground mine operations were delayed, it’s a sign towards recovery as production
of high value products is set and the Company’s capacity to generate export sales from coking coal and
coke is enhanced. Foreign currency remained a challenge during the year, as most of the underground
equipment spares are imported from South Africa.
d) Coke Production
The Company is still pursuing takeover project of the Hwange Coal Gasification Company (HCGC) Coke
oven battery pursuant to a BOOT Agreement with its Chinese partners in HCGC. Engagements remain in
place to ensure that this is achieved without placing risk on the Company. The Company has placed more
emphasis and attention on the building of its own coke oven battery going forward.
e) Cost reduction
The Company adopted a low-cost high productivity strategy. This has enabled the Company to
significantly reduce its costs. The employment costs have reduced owing to the short time working
arrangement as well as revision of employment benefits in line with industry best practice as well as
Company’s capacity to pay. The strategy was however negatively affected by the macroeconomic
environment which pushed prices of inputs up.
f) Improve efficiencies and competitiveness
As the Company increases the thrust on the core business of mining, it will also look at ways of allowing
other entities to assist in the running of town services such as road maintenance, electrical power
distribution and sewage treatment. The adoption of enterprise resource planning systems to automate the
administration of the business will also improve efficiencies and lower the cost per ton of coal produced.
OUTLOOK
Strategic plans to unearth the Company’s potential are being developed and these include:-
a) Increasing the volume of high value and high margin coking coal
The company will continue to focus more on underground mine operations and opencast operations at
the JKL pit in order to increase high value coking coal in the product mix.
b) Toll coking and replacement of Hwange Colliery’s Coke Oven Battery
The company will pursue toll coking arrangements with the available coke oven batteries in order to
generate foreign currency from the export of coke in the medium to long term. The company will also
consider options to construct own coke oven battery using the cheaper modern technologies.
c) Fixed and mobile plant repair and restoration of full capacity
As a mine that has operations spread-out on a wide geographic area, it is important to use efficient
means of transporting coal from the pits to the processing plants and the rail siding. Therefore, the repair
and full capacity restoration of the coal handling plant, conveyor belts and the No 2 processing plant is a
key enabler for high volume and least cost production. Urgent attention will be to increase excavators,
repair the HMS plant and acquire the third shuttle car for underground.
d) Development of new Concessions
The life of mine at the current open cast operations is estimated to be less than 10 years. Therefore, the
non-renewal of the Western Areas coal fields mining rights threatens the future of the company as well as
the 25-year coal supply agreement which was signed with the Zimbabwe Power Company’s Hwange
Power Station Stage 3 expansion. These new developments require the company to plead for the
renewal of the western areas or get alternative reserves around the current mining areas if there are any
chances to supply stage 3 expansion with coal and also guarantee of the opencast mining operations to
beyond 10 years.
e) Increase volume of export sales
Given the deliberate focus on increasing the mix of high value and margin coking coal and coke, the
Company will grow its market share in the neighbouring countries. Hwange Colliery’s coking coal and
coke meets exacting quality specifications in the ferro-chrome industries and smelters. In collaboration
with the National Railways of Zimbabwe, the Company will develop dedicated solutions for the delivery of
coking coal and coke products to customers in the region and within the country.
Zimbabwe Stock Exchange and JSE Limited LISTING
The company’s Listings on the Zimbabwe Stock Exchange and the JSE Limited was suspended on 02
November 2018 and remains suspended.
DIRECTORATE
During the year under review Hwange Colliery Company was placed under reconstruction in terms of
section 4 of the reconstruction of State-Indebted Insolvent Companies Act (chapter 24:27). I was
appointed as administrator, assisted by: Mutsa Mollie Jean Remba & Munashe Shava.
Owing to the above Messrs Muskwe J, Vera V, Masuku N and Tome E.N ceased to be non-executive
directors of Hwange Colliery Company Limited with effect from 26 October 2018.
APPRECIATION
I would like to express my gratitude to the administration team, management and Staff for their collective
efforts and dedication to the Company.
B. Moyo (MR)
Administrator
26 April 2019
Auditor’s Statement
The summary of the financial statements should be read in conjunction with the full set of audited
financial statements of Hwange Colliery Company Limited for the year ended 31 December 2018 which
have been audited by Independent Auditors Messrs Grant Thornton Chartered Accountants Zimbabwe.
The audit opinion on the company’s financial statements is an adverse opinion in respect of going
concern status of the company; non-compliance with International Accounting Standard 21, The effects of
Changes in Foreign Exchange Rates; and the inclusion of the Financial results of the company’s
investments in associates and joint venture company for the year ended 31 December 2018 which have
not been audited.
The audit report includes a section on key audit matters comprising of allowance for credit losses,
recognition of revenue, valuation of inventory for coal and coal related products; provision for
rehabilitation, understatement of payables and taxation
CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017
USD USD
Revenue 5 69 144 019 54 497 858
Cost of Sales (72 540 235) (53 150 059)
Gross (loss)/profit (3 396 216) 1 347 799
Other Income 7 1 312 918 795 358
Other gains and losses 8 - (3 609)
Marketing Costs (584 759) (1 232 479)
Administrative costs (32 261 863) (25 098 637)
Impairment of assets 14 (19 607 454) -
Care and maintenance (6 314 355) -
Loss on disposal of - (6 521 040)
treasury bills
Operating loss before (60 851 728) (30 712 608)
interest and tax
Finance costs 9 (17 614 462) (13 062 019)
Share of profit/(loss)
from equity accounted
investments 10 23 507 (63 113)
Loss before tax 11 (78 442 683) (43 837 740)
Income tax expense 12 - -
Loss of the year (78 442 683) (43 827 740)
Other Comprehensive
income
Share of other
comprehensive income
of equity accounted - -
investment, net of tax
Other comprehensive
income, net of tax - -
Total comprehensive
loss for the year (78 442 683) (43 837 740)
Attributable loss per 13.1 (0.43) (0.24)
share -basic
-diluted 13.2 (0.43) (0.24)
Headline Loss per
share - basic 13.3 (0.31) (0.20)
-diluted 13.4 (0.31) (0.20)
CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018
Notes 2018 2017
USD USD
ASSETS
Non current assets
Property, plant and 14 80 135 517 107 569 137
equipment
Investment Property 15 4 490 000 4 490 000
Investments accounted
for using the equity 16 14 776 538 14 753 031
Intangible assets 17 486 448 699 311
Inventories – non
current portion 18 6 812 230 8 138 714
Stripping activity asset 19 1 471 273 -
108 172 006 135 650 193
Current assets
Stripping activity asset - 8 871 563
Inventories 20 16 948 244 13 413 017
Trade and other 21 31 914 245 31 427 775
receivables
Cash and cash 23 1 562 699 8 864 181
equivalents
50 425 188 62 576 536
Total Assets 158 597 194 198 226 729
Equity and liabilities
Capital Reserve
Share capital 24 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 (380 872 376) (302 429 693)
(290 024 645) (211 581 962)
Non current liabilities
Finance lease and 25 500 000 600 000
liability
Borrowings 26.1 169 393 312 150 312 838
Long term creditors 27 212 511 251 210 226 850
Income tax liability 10 054 850 10 054 850
392 459 413 371 194 538
Current Liabilities
Finance lease liability 25 811 190 390 959
Borrowings 26.2 545 455 -
Trade and other 27 38 644 022 24 364 013
receivables
Provisions 28 16 161 759 13 859 171
56 162 426 38 614 153
Total equity and 158 597 194 198 226 729
liabilities
CONDENSED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2018
Notes 2018 2017
USD USD
Loss before tax (78 442 683) (43 837 740)
Adjustment for non-
cash items:
Foreign exchange loss - 3 609
Insurance claim 7 (304 243) (129)
Finance cost 9 17 614 462 13 062 019
Impairment of assets 14 19 607 454 -
Inventory write down of
spares products 3 408 769 -
Depreciation 14 11 993 174 13 399 288
Share of profit/(loss)
from equity accounted
investments (23 507) 63 113
Amortisation 17 212 863 269 530
Treasury bills discount (892 349) -
reversal
Discount received 441 721 (1 756 767)
Operating cash flow
before changes in (27 267 781) (18 797 077)
working capital
Changes in working
capital:
(Increase)/decrease in (2 208 743) 2 895 528
inventory
Decrease/(Increase) in 7 400 290 (8 871 563)
stripping activity asset
Increase in receivables (486 470) (13 132 468)
Increase in provisions 2 302 588 2 695 829
Increase/(decrease) in 14 280 009 (212 673 109)
trade and other
payables
Cash utilised in (5 980 107) (247 882 860)
operating activities
Interest paid (1 254 171) -
Net cash flows utilised
in operating activities
(7 234 278) (247 882 860)
Cash flows from
investing activities
Acquisition of property, (4 167 008) (1 707 063)
plant and equipment
Cash flows from
financing activities
(Decrease)/increase in (5 896 901) 210 226 850
long term creditors
Proceeds from 12 789 048 52 284 000
borrowings
Repayment of (2 792 343) (4 335 506)
borrowings
Proceeds from - 129
insurance
Net cash flows
generated from 4 099 804 258 175 473
financing activities
Net decrease in cash
and cash equivalents (7 301 482) 8 585 550
Cash and cash
equivalents at 8 864 181 278 631
beginning of the year
Cash and cash
equivalents at end of 23 1 562 699 8 864 181
year
CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018
Non-
Share Share distributable Revaluation Accumulated
Capital Premium Reserves Reserve Losses Total
USD USD USD USD USD USD
Balance as at 1 45 962 789 577 956 4 358 468 39 948 518 (258 591 953) 167 744 222
January 2017
Total - - - - (43 837 740) (43 837 740)
comprehensive
loss for the year
Balance at 31 45 962 789 577 956 4 358 468 39 948 518 (302 429 693) (211 581 962)
December 2017
Balance at 1 45 962 789 577 956 4 358 468 39 948 518 (302 429 693) (211 581 962)
January 2018
Total - - - - (78 442 683) (784 422 683)
comprehensive
loss for the year
Balance at 31 45 962 789 577 956 4 358 468 39 948 518 (380 872 376) (290 024 645)
December 2018
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
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) areas:
i) Mining - the extracting, processing and distribution of coal and coal products.
ii) Medical services - provides healthcare to staff 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 Administrator on 26 April 2019
Functional and 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. The continued
constrained exchangeability between the United States Dollars and Real Time Gross Settlement or Bond
notes and coins require application of IAS 21: The Effects of Changes in Foreign Currency Rates.
However, the Company was not able to comply with the requirements of this standard due to the need to
adhere to the requirements of Statutory Instrument 33 of 2019.
Use of estimates and judgements – Determination of the functional currency
In 2009, the Government introduced the multi-currency regime. The United States Dollar (USD) became
the principal trading currency and was accepted as both the functional and presentation currency by most
entities in Zimbabwe including the Company. Due to the shortages of foreign currency, which started in
2016 the Reserve Bank of Zimbabwe introduced significant monetary and exchange control policies
between 2016 to date. The following are some of the major policies introduced:
1. Introduction of government directives to open the Real Time Gross Settlement System (RTGS) to
use other currencies (i.e. ZAR etc.) and the requirement for entities to further adopt and embrace
multi-currencies.
2. Introduction of $200 million worth of bond notes in addition to the bond coins initially issued at 1:1
rate to the USD.
3. Promulgation of new legislation in the form of statutory instruments 122A of 2017 that defines
currency to include bond notes and coins only for the purposes of the regulations. Statutory
Instrument 122A of 2017 was crafted with the objective of curbing illegal dealings in currency and
giving the police special powers to confiscate the currency notes.
4. Priority listing of foreign payments which brought an impact on the timing of settlement of foreign
payables.
5. The separation of RTG FCA accounts and Nostro FCA accounts with effect from 15 October
2018.
The shortage of cash and funded Nostro bank accounts saw the emergence of different prices for goods
and services settled via Real time Gross Settlement System (RTGS), Point of sale (POS) and mobile
money. As a result of this and other factors, the Administrators had to make an assessment to determine
whether the use of the USD as the Company’s functional currency is still appropriate and are the financial
statements complying with the guidelines of IAS 21. The different modes settlement does not result in
change in functional currency. The Administrator concluded that the USD is still the functional currency
for the Company and the RTGS$ for year under review was pegged at as 1:1 with the US$.
2 Statement of Compliance
The abridged financial results of the Company have been prepared using accounting policies
consistent with International Financial Reporting Standards (IFRS) and International Accounting
Standards (IASB). The same accounting policies, presentation and methods followed in the
abridged financial results are as applied in the Company latest annual financial statements. The
Company’s partially complied with the International Financial Reporting Standards due to the
requirements to comply with Statutory Instrument 33 of 2019.
3 Changes in accounting policies
3.1 New and revised IFRS affecting amounts reported and/or disclosures in the financial
statements
In the current year, the Company applied a number of new and revised IFRSs issued by the
International Accounting Standards Board (IASB) that are mandatorily effective for an
accounting period that begins on or after 1 January 2018. The amended standards,
described below, did not have a material impact on the financial position or performance of
the Company: -
IFRS 9, Financial Instruments,
IFRS 9 replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’. It makes
major changes to the previous guidance on hedge accounting, classification and
measurement of financial assets and introduces an ‘expected credit loss’ model for the
impairment of financial assets.
There were no differences arising from the adoption of IFRS 9 in relation to classification,
measurement and impairment of financial instruments.
The adoption of IFRS 9 has impacted the following areas:
• The classification and measurement of the Company’s financial assets. Management holds
financial assets to hold and collect the associated cash flows.
• The impairment of financial assets applying the expected credit loss model. This affects the
Company’s trade receivables measured at amortised cost. For contract assets arising from IFRS
15 and trade receivables, the Company applies a simplified model of recognising lifetime
expected credit losses as these items do not have a significant financing component.
3.2 New Standards, amendments and interpretations to existing standards that are not yet
effective and have not been adopted early by the Company
IFRS 16 ‘Leases’
IFRS 16 will replace IAS 17 and three related interpretations. It completed the IASB’s long-
running project to overhaul lease accounting. Leases will be recorded on the statement of
financial position in the form of a right-of-use asset and a lease liability. IFRS 16 is effective
from periods beginning on or after 1 January 2019. Management is yet to fully assess the
impact of the Standard and therefore is unable to provide quantified information. However, in
order to determine the impact, the Company is in the process of:
• performing a full review of all agreements to assess whether any additional contracts will now
become a lease under IFRS 16’s new definition.
• deciding which transitional provision to adopt; either full retrospective application or partial
retrospective application (which means comparatives do not need to be restated). The partial
application method also provides optional relief from reassessing whether contracts in place are,
or contain, a lease, as well as other reliefs. Deciding which of these practical expedients to adopt
is important as they are one-off choices.
• assessing their current disclosures for finance leases and operating leases as these are likely to
form the basis of the amounts to be capitalised and become right-of-use assets
• determining which optional accounting simplifications apply to their lease portfolio and if they are
going to use these exemptions.
4 Summary of accounting policies
4.1 Overall considerations
The financial statements have been prepared using the measurement bases specified by
IFRSs for each type of asset, liability, income and expense. The measurement bases are
more fully described in the accounting policies below.
4.2 Investment in associates and joint ventures
Investment 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 profit 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.
4.3 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.
4.4 Operating expenses
Operating expenses are recognised in profit 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.
4.5 Finance costs
Finance costs are reported on an accrual basis using the effective interest method.
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
2018 2017
USD USD
5 Revenue
Mining 56 787 889 44 292 950
Medical services 2 045 280 668 434
Estates 10 310 850 9 536 474
69 144 019 54 497 858
6 Segment reporting
For management purposes, the Company is organised into divisions based on its products and services
and has three reportable segments, as follows:
I) Mining – the extracting, processing and distribution of coal and coal products
ii) Medical services – provides healthcare to staff members and the surrounding community, and
iii) Estates – the division provides properties for rental and sell retail goods and services.
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 management 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:
Sales within Zimbabwe 66 786 802 51 970 674
Sales elsewhere in 2 357 217 2 527 184
Sub-Saharan Africa
Total Revenue 69 144 019 54 497 858
7 Other Income
Insurance claims 304 243 129
Rental income 465 525 528 879
Sale of scrap metal 241 624 90 037
Sundry income 301 526 176 313
1 312 918 795 358
8 Other gains and
losses
Foreign exchange loss - (3 609)
9 Finance costs
Interest on loans and
overdrafts 17 485 367 12 884 362
Interest on leases 129 095 177 657
17 614 462 13 062 019
Interest on loans and overdraft comprise of interest charged on the Government of Zimbabwe debt at a
rate of 7% per annum, ZAMCO and EXIM loan and finance lease facilities at an interest rate of 7% and
LIBOR + 3.5% per annum respectively.
10 Share of losses from equity accounted investments
Included in this amount is the Company’s share of loss after tax from:
Clay Products 23 507 (63 113)
(Private) Limited
Hwange Coal - -
Gasification Company
23 507 (63 113)
11 Loss before tax
Loss before tax for the
year has been arrived
at after charging the
following:
Expected credit losses 1 164 968 2 891 699
Amortisation 212 863 269 530
Annual licence fees – - 125 000
mining rights
Audit fees 91 375 91 375
Depreciation on 11 993 174 13 399 288
property, plant and
equipment
Impairment of assets 19 607 454 -
Directors’
emoluments:
- Executive 441 065 439 606
Directors
- Non- 71 370 143 319
Executive
Directors
Employee benefits 19 094 941 26 783 564
expense
Retrenchment - 2 346 042
package
Loss on disposal of - 6 521 040
Treasury bills
11.1 Employee benefits
expense
Salaries and other 17 816 032 25 175 753
contributions
Contribution to Mining 974 373 1 056 360
Industry Pension Fund
Contribution to 304 536 551 451
National Social
Security Authority
Employee benefit expense amounting to USD 6 694 782 (2017: USD 11 558 294) was charged directly to
cost of sales.
12 Income tax
12.1 Current tax
Current tax - -
Deferred tax - -
Income tax
(credit)/expense
13 Loss per share
13.1 Basic
Loss attributable to
shareholders (78 442 683) (43 837 740)
Weighted average
number of ordinary
share issue 183 720 699 183 720 699
Basic loss per share
(0.43) (0.24)
Basic loss per share is calculated by dividing the loss attributable to shareholders by the weighted
average number of ordinary shares purchased by the Company and held as treasury shares.
13.2 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.
Loss used to determine
diluted loss per share
(78 442 683) (43 837 740)
Weighted average
number of ordinary 183 720 699 183 720 699
shares in issue
Diluted loss per share (0.43) (0.24)
13.3 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.
IAS 33 – Loss for the (78 442 683) (43 837 740)
year
Non-recurring items:
Proceeds on sale of (241 624) (90 037)
scrap
Retrenchment costs - 4 382 064
Impairment costs 19 607 454 -
Stripping activity asset
impairment 7 400 290 -
Loss on disposal of
treasury bills (892 350) 6 521 040
Tax effect of the above (4 756 921) (2 260 089)
Headline loss (57 325 834) (35 284 762)
Weighted average
number of ordinary 183 720 699 183 720 699
shares in issue
Headline loss per share (0.31) (0.19)
13.4 Diluted headline loss
per share
Loss used to determine
diluted headline loss (57 325 834) (35 284 762)
per share
Weighted average
number of ordinary 183 720 699 183 720 699
shares in issue
Diluted headline loss (0.31) (0.20)
per share
14 Property, plant and
equipment
Carrying amount at the 107 569 137 119 261 362
beginning of the year
Additions 4 167 008 1 707 063
Impairment (19 607 454) -
Depreciation (11 993 174) (13 399 288)
Carrying amount at the
end of year 80 135 517 107 569 137
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
14.1 Finance Lease arrangements
The Company has certain property that is held under a finance lease arrangement. As at 31
December 2018, the carrying amount of the property is USD 670 931 (2017: USD 720 931) included in
freehold land and buildings. Finance lease liabilities are secured by the related assets held under finance
leases.
15 Investment property
Valuation at 1 January 4 490 000 4 490 000
Fair value gains
(included in other gains - -
and losses)
Valuation at 31 4 490 000 4 490 000
December
The following amount has been recognised in the statement of comprehensive income:
Rental income 465 525 528 879
16 Investments accounted
for using the equity
method
Investments in 23 507 -
associates
Investments in joint 14 753 031 14 753 031
venture
14 776 538 14 753 031
16.1 Investments in
associates
Carrying amount as at - 63 113
1 January
Share loss 23 507 (63 113)
Carrying amount as at
31 December 23 507 -
The Company holds a 49% voting and equity interest in Clay Products (Private) Limited. Hwange Colliery
Company Limited also holds 44% voting and equity interest in Zimchem Refineries (Private) Limited. The
investments are accounted for under the equity method.
The shares are not publicly listed on a stock exchange and hence published price quotes are not
available. The aggregate amounts of certain financial information of the associates can be summarised
as follows:
16.2 investment in joint venture
Carrying amount as at 14 753 031 14 753 031
1 January
17 Intangible assets
Carrying amount at the
beginning of the year 699 311 968 841
Amortisation (212 863) (269 530)
Carrying amount at the
end of year 486 448 699 311
The Company has an enterprise resource planning (ERP) software that supports the administration and
control of the Company. Some modules for mine planning and marketing are still to be developed. Mining
rights comprise coal mining claims which are yet to be mined. No intangible assets have been pledged as
security for liabilities.
The company has four (4) mining concessions, Hwange Concession, Lubimbi East and Lubimbi West.
The special grants, Lubimbi East and Lubimbi West measure 9 648, 4 200 and 10 995 hectares of
minable area respectively and were awarded by the government of Zimbabwe on 31 July 2015.
18 Inventories – non
current portion
Balance at 1 January 9 732 259 10 683 011
Additions to stockpiles 281 260 -
Sales (1 205 808) (950 752)
Balance at 31 8 807 711 9 732 259
December
Balance at end of year
is classified as follows:
Non-current portion 6 812 230 8 138 714
Current portion 1 995 481 1 593 545
(included inventories)
8 807 711 9 732 259
The Company accumulated coal fines over the years for which an active market was identified in 2009.
Coal fines in excess of the average annual uptake of the product have been classified as non-current
assets.
No coal fines were written down in 2018 (2017: USD nil)
19 Stripping activity asset
Balance at 1 January 8 871 563 -
Current year pre-stripping costs - 8 871 563
provision for impairment (7 400 290) -
Balance at 31 December 1 471 273 8 871 563
Balance at end of year allocated as follows
Non-current assets 1 471 273 -
Current Assets - 8 871 563
Balance at end of year 1 471 273 8 871 563
20.Inventories
Raw materials/consumables 6 150 610 9 144 097
Finished goods
-Coal 8 802 153 2 675 375
-Coal Fines (note 18) 1 995 481 1 593 545
16 948 244 13 413 017
During the year ended 31 December 2018, a total of 3 408 769 (2017: USD 307 544) worth of inventories
was included in profit and loss as an expense resulting from write down of inventories to net realisable
value.
No reversal of previous write-downs was recognised as a reduction of expense in 2018 (2017: nil)
21. Trade and other receivables
Trade receivables, gross 33 414 497 45 444 344
Allowance for credit losses (24 595 962) (23 430 994)
Trade receivables, net 8 818 535 22 013 350
Other receivables 23 095 710 9 414 425
31 915 245 31 427 775
All amounts are short-term. The net carrying value of trade receivables is considered a reasonable
approximation of fair value.
The Company adopted IFRS 9 “Financial instruments” from 1 January 2018 which resulted in changes in
the accounting policy on trade receivables. The Company elected the simplified approach to measuring
expected credit losses which uses a lifetime expected loss allowance for all trade receivables and
contract assets. To measure the expected credit losses, the credit risk and credit profile of each
receivable was considered on an individual basis.
22 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
Hwange Coal 6 731 667 15 229 281
Gasification Company
Clay Products
(Private) Limited 53 766 53 341
Zimchem 238 077 235 581
7 023 510 15 518 203
Related party
payables:
Hwange Coal 4 338 672 14 011 004
Gasification Company
Zimchem Refineries 24 639 39 666
(Private) Limited
4 363 311 14 050 670
Transactions with
Hwange Coal 5 549 868 4 833 006
Gasification Company
(HCGC)
Transactions with Clay
Products (Private)
Limited 62 533 7 705
Transactions with
Zimchem Refineries
(Private) Limited 26 645 19 481
Loans from 138 174 513 119 955 416
shareholders
Transactions with key
management 3 559 978 3 285 191
personnel
23 Cash and cash equivalents
For the purposes of statement of cash flows, cash and cash equivalents include cash on hand in banks
net of outstanding bank overdrafts
Bank and cash 1 562 699 8 864 181
balances
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
2018 2017
USD USD
24 Share capital
Authorised
204 000 000 ordinary
shares of USD0.25 51 000 000 51 000 000
each
Issued and fully paid
110 237 432 Ordinary
shares of USD0.25 27 559 358 27 559 358
each
5 925 699 Ordinary
shares issued under
share option scheme 1 514 039 1 514 039
67 557 568 “A”
Ordinary shares of 16 889 392 16 889 392
USD0.25 each
45 962 789 45 962 789
25 Finance Lease Liability
Non-current 500 000 600 000
Current 811 190 390 969
1 311 190 990 969
The finance lease
liability carrying
amount is disclosed as
follows:
25.1 OK Zimbabwe
Long term portion 500 000 600 000
Add: short term portion 811 190 390 969
Finance lease liability
Principal 1 000 000 1 000 000
Accrued interest
311 190 (9 031)
1 311 190 990 969
26 Borrowings
26.1 Long term loans
Export Import Bank of
India (EXIM) 14 430 000 13 703 666
Government of 138 174 513 119 955 416
Zimbabwe
Zimbabwe Asset
Management 16 788 799 16 653 756
Corporation (ZAMCO)
169 393 312 150 312 838
Less – Current portion
of long-term loans - -
169 393 312 150 312 838
26.2 Short term loans
CBZ 545 455 -
27 Trade and other
payables-current
Trade 16 478 846 9 383 539
Other 22 165 176 14 981 474
38 644 022 24 364 013
Trade and other
payables – long term
trade 89 873 683 73 277 839
Other 122 637 568 136 949 011
212 511 251 210 226 850
28 Provisions
Provisions for
rehabilitation 8 683 675 7 217 507
Other provisions
7 478 084 6 641 664
16 161 759 13 859 171
28.1 Provisions for
rehabilitation
At 1 January charged
to profit or loss: 7 217 507 6 371 883
Additional provisions
made during the year 1 466 168 845 624
At 31 December 8 683 675 7 217 507
28.2 Other provisions
Death benefits 4 095 801 3 528 559
Leave pay and bonus
provisions 3 382 283 3 113 105
7 478 084 6 641 664
29 Going concern
The Company is experiencing the following challenges which have an effect on its ability to continue
operating as a going concern:
29.1 Recurring losses
The Company incurred a loss for the year of USD 78 442 683 (2017: USD43 837 740). The increase in
the reported loss by the Company is mainly attributable to non-recurring expenditure recognised by the
Company through the impairment of assets amounting to USD 27 007 744.
29.2 Negative Equity
As at 31 December 2018, the Company’s total liabilities exceeded total assets resulting in a negative
equity position of USD290 024 645 (2017: USD 211 581 962). This is attributable to recurring losses
which eroded the capital and reserves.
29.3 Low machine availability
The Company experienced low machine availability mainly as a result of technical challenges
faced in operating the equipment and inadequate working capital
In view of the above, the Administrators 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.
Hwange placed under reconstruction
Hwange Colliery Company Limited has been placed under reconstruction in terms section 4 of
the reconstruction of State-indebted insolvent Companies Act (chapter 24:27). This was done to
rescue the company from current difficulties which resulted in liabilities of the company exceeding
assets which is technical insolvent. This is expected to give a professional and fresh approach to
try and give the company a chance to overcome the bottlenecks which were centered on poor
production and sales volumes.
Comprehensive production and sales plan
The company has put in place a comprehensive production and sales plan which will be driven by
own mining at 3 main underground mine and JKL opencast mine. This plan will see 3 mains
producing an average of 35 000 MT per month of high value coking coal in the first of 2019 and
will increase production to 40 000 MT per month in July and to 50 000 MT in October 2019. JKL
operation will produce an average of 70 000 MT per month in the first half of 2019 and increase
the volumes to 120 000 in the 2nd half. This will be 50% power coal and 50% high value coking
coal. The mining contractor is also expected to produce 100 000 MT per month as from July
2019. This will be 50% industrial coal and 50% power coal. This production plan will see the
company shifting away from the traditional approach of relying more on the contractor capacity
than its own production.
The sales plan will be driven by the sale of high value coking coal to mainly coke batteries and industry.
The company is also planning to start producing coke by the second half of 2019 through toil coking. The
company has capacity and market to produce and sale a minimum of 45 000 MT of coking coal locally.
The company have also made significant steps towards penetrating the southern market which has
potential for 30 000 MT of coking coal and 10 000 MT of industrial coal which will bring the much needed
foreign currency .The company has put in place a mechanism to raise significant amounts of foreign
currency from both exports and domestic sale .The foreign currency will. be used to fund working capital
and capital projects that are required to increase production to 170 000 MT of HCCL own mining.
The key projects that are expected to stabilise production to the planned level of 170 000 MT for HCCL
own mining is the acquisition of 2 excavators for opencast and a third shuttle car for 3 main. The projects
will be funded mainly from the internally generated resources through the sale of coking coal and some
prepayment arrangements with some key customers.
Cost control and working capital management strategies
The company is also going to implement a very tight cost control and working capital management
system by allocating most of the cash resources towards the operations requirements. This will ensure
that the company will only spend what they have generated. This will be achieved by ensuring that most
customers will be paying upfront on all their orders and also paying most creditors upfront. This will stop
the ballooning of liabilities which has pushed the company into negative net current assets.
Continuing with the scheme of arrangement
The company will continue with the scheme of arrangement, agreed payment plan to creditors although
the time line maybe adjusted a bit through engagements with all the creditors. This strategy will see the
company reversing the gross loss in 2019 and start moving towards profitability.
30. Operating environment
In 2017, the economic environment had started to show signs of distortions where a ‘multi-tiered’ pricing
regime was creeping into the economy in which similar goods and services were being priced differently
depending on the mode of payment, whether USD cash, electronic payment, mobile money or bond notes
and coins.
The 2018 operating environment was characterised by significant monetary and fiscal policy reforms that
commenced in October 2018.
Distortions in the foreign exchange market negatively affected the economic environment resulting in the
proliferation of
the ‘multi-tiered’ pricing where settlement of transactions was depending on the mode of payment,
whether USD cash, electronic payment, mobile money or bond notes and coins.
During the Year, the company predominantly transacted in RTGS FCA (electronic payments), including
mobile money, bond notes and coins
Events after the reporting date
On 20 February 2019 the Reserve Bank of Zimbabwe (RBZ) Governor announced a new Monetary Policy
Statement whose Highlights were as follows:
30.1 The domination of RTGS balances, bond notes and coins collectively as RTGS dollars “RTGS $ and
subsequent inclusion of RTGS dollars as part of the multi-currency system.
30.2 RGTS dollars to be used by all entities (including government) and individuals in Zimbabwe for
purposes of pricing goods and services, recorded debts, accounting and settlement of domestic
transactions.
30.3 The establishment of an inter-bank foreign exchange market where the exchange would be
determined by market forces.
On 22 February 2019, Statutory Instrument 33 of 2019 was issued. The Statutory instrument prescribed
the accounting for RTGS balances and bond notes, and USD transactions as well as the related
conversions. It also gave effect to the introduction of the RTGS dollars as a legal tender. In terms of this
statutory instrument, ‘for accounting and other purposes’ certain assets and liabilities on the effective date
would be deemed to be RTGS dollars at a rate of 1:1 to the USD and would become opening RTGs dollar
values from the effective date. Following this, the Administrators adopted RTGS dollars as its functional
and reporting currency with effect from 22 February 2019.
Adjusting events
The announcement of the Monetary Policy Statement on 20 February 2019 and the subsequent issuance
of ‘SI 33/2019’ on 22 February 2019 were considered by management to be adjusting events after the
reporting period, which, in terms of IAS 10-events after the reporting period, would require adjustments to
the financial statements. However, ‘SI 33/2019’ prescribed specific accounting treatment for assets and
liabilities which was in not consistent with International Finical reporting Standards (IFRSs), in the light of
the lack of consistency between the requirements of IFRSs and ‘SI 33/ 2019’ management were guided
by ‘SI 41/2019’ which states that in the case on any inconsistency between a local pronouncement issued
by the board through a notice in the Government Gazette and any international standard ,the local
pronouncement shall take precedence to the extent of the inconsistency. Management have therefore
prepared these financial statements in USD and applied a rate of 1:1 between USD.
A sensitivity analysis for events after the reporting period for the finical year ended 31 December 2018 is
shown below.
Components of reported amounts Sensitivity analysis
Non- Total Total RTGS Total RTGS $
Monetary Monetary Total RTGS $
Monetary translated at $ translated translated at
Assets/ Assets/ translated at
Assets/ rate of at rate of rate of
Liabilities Liabilities rate of
Liabilities US1:RTGS$ US1:RTGS$ US1:RTGS$3.
Nostro FCA Nostro FCA US1:RTGS$4
Nostro FCA 1 2.5 5
Element
ASSETS
Property,
Plant and - - 80 135 517 80 135 517 80 135 517 80 135 517 80 135 517
equipment
investment
- - 4 490 000 4 490 000 4 490 000 4 490 000 4 490 000
property
Investment
accounted
for using - - 14 776 538 14 776 538 14 776 538 14 776 538 14 776 538
the equity
method
Intangible
- - 486 448 486 448 486 448 486 448 486 448
assets
Inventories
- noncurrent - - 6 812 230 6 812 230 6 812 230 6 812 230 6 812 230
portion
Stripping
activity - - 1 471 273 1 471 273 1 471 273 1 471 273 1 471 273
asset
Inventories - - 16 948 244 16 948 244 16 948 244 16 948 244 16 948 244
Trade and
other 2 048 535 29 865 710 - 31 914 245 34 987 049 37 035 584 38 059 852
receivables
Cash and
cash 43 578 1 519 121 - 1 562 699 1 628 066 1 671 644 1 693 433
equivalents
Total
2 092 113 31 384 831 125 120 250 158 597 194 161 735 364 163 827 477 164 873 534
Assets
EQUITY AND LIABILITIES
Share
- 45 962 789 - 45 962 789 45 962 789 45 962 789 45 962 789
capital
Share 577 956 577 956 577 956 577 956
- 577 956 -
Premium
Non-
Distributabl - 4 358 468 - 4 358 468 4 358 468 4 358 468 4 358 468
e reserve
Revaluation
- 39 948 518 39 948 518 39 948 518 39 948 518 39 948 518 39 948 518
reserve
Translation
- - - - (53 383 783) (88 972 972) (106 767 566)
reserve
Accumulate (380 872 (380 872
- (380 872 376) - (380 872 376) (380 872 376)
d losses 376) 376)
Total
(290 024 (343 408
shareholder - (290 024 645) - (378 997 617) (396 792 211)
645) 428)
’s equity
LIABILITIES
Finance
lease - 1 311 190 - 1 311 190 1 311 190 1 311 190 1 311 190
liability
Borrowings 14 430 000 155 508 767 - 169 938 767 191 583 767 206 013 766 213 228 766
Long term
23 251 302 189 259 948 - 212 511 251 247 388 204 270 639 506 282 265 157
creditors
Trade and
other - 38 644 022 - 38 644 022 38 644 022 38 644 022 38 644 022
payables
Income Tax
- 10 054 850 - 10 054 850 10 054 850 10 054 850 10 054 850
liability
Provisions - 16 161 760 - 16 161 760 16 161 760 16 161 760 16 161 760
Total 37 681 302 410 940 537 - 448 621 839 505 143 792 542 825 094 561 665 745
liabilities
Total equity
and 37 681 302 120 915 892 - 158 597 194 161 735 364 163 827 477 164 873 534
liabilities
31 Administration
The Government on the 26th of October 2018 granted a reconstruction order for Hwange Colliery Limited
under the Reconstruction of State-Indebted Insolvent Companies Act [Chapter 24:7] (No 27 of 2004)
31.1 The following were appointed:
Mr. Bekitemba Moyo - Administrator
Ms. Mutsa Mollie Jean Remba - Assistant Administrator
Mr. Munashe Shava - Assistant Administrator
Zimbabwe
6 May 2019
Sponsor: Sasfin Capital (a member of the Sasfin Group)
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