Zambian coal mine to double production aid financial hitches
Posté: Ven 6 Nov 2009 14:35
Zambian coal mine to double production aid financial hitches
Posted on Friday 6 November 2009 - 09:36
Zambia’s largest and obsolete coal mine, Maamba Collieries Limited (MCL) which has been experiencing financial and production problems for many years has stepped up efforts to market its coal to raise revenue so as to quickly normalise operations and resolve the issue of salary arrears for employees.
Management at the Southern Zambia based mine has signed coal sales contracts with Lafarge, (formerly Chilanga Cement Company), for 10,000 tonnes worth K10 billion for delivery up to December, 2009, and Zambezi Portland Cement for 4,000 tonnes per month worth K1.2 billion every month.
Maamba management has also clinched orders from the Democratic Republic of Congo, (DRC), of about 4,000 tonnes worth K1.2 billion and Malawi for 3,000 tonnes worth K900 million. Apart from marketing the coal which is on site, the company is actively looking for other forms of finance in the interim and is committed to paying the salary arrears as soon as possible.
Zambia’s Mines Minister, Maxwell Mwale, said during the period from June to September, this year, the company had managed, from its constrained cash flow to pay salary advances to its employees. The advances that were paid were applied uniformly to all employees, including senior managers.
Prior to 2009, MCL had relied on borrowed funds from Zambia Consolidated Copper Mines – Investment Holdings, (ZCCM – IH), for staff salaries. It was envisaged that with the resumption of operations that started in the last week of April, 2009, Maamba mine would manage to meet its own obligations.
In the initial production phase, MCL had experienced difficulties in marketing the coal produced from its operations in time, giving rise to severe financial constraints leading the company’s failure to meet staff salaries and payment to the contract miner. MCL lost its traditional local market due to its unreliable coal production which led its customers to source for coal from producers outside the country.
The major consumers of coal were the smelters on the Copperbelt. However, with the change in smelting technologies, these smelters are not consuming huge quantities of coal as before. For example, the Nkana Smelter which used to consume huge quantities of coal for its smelting operations is on care and maintenance, having been replaced by a more modern plant at Nchanga which does not use coal.
Therefore, ZCCM –IH has been vigorously looking for a strategic equity partner for the development of Maamba mine and a thermal power plant at the mine to create a ready market for the coal.
The Zambia Development Agency, (ZDA), Negotiating Team, in line with the ZDA Act, is carrying out negotiations with the preferred bidders to partner with ZCCM – IH in the development of Maamba mine and thermal power plant. The negotiations are said to have reached an advanced stage and, once concluded, will be submitted to the Committee of Ministers prior to presentation to Cabinet before any announcement of the results of these negotiations can be made public.
MCL has been in existence as a mining entity for over forty years. Before the takeover by ZCCM – IH, the mine had produced about 15.2 million tonnes of Run of Mine, (ROM), coal. From inception in 1969 up to 1991, MCL operated a profitable mine venture.
However, from 1991 to date, the mine has faced ernomous financial and operational problems that have significantly affected its profitability and its concern status. Since 1991, the mining operations have been on and off and with insignificant production output and high cost structure. This prompted the government to sale 100% shares to ZCCM – IH in 2007 with a view to resuscitating the operations at Maamba.
The start of problems at Maamba coincided with operational difficulties of the Zambian copper mining industry in the period prior to privatisation. It was during this period that ZCCM was operating unprofitably owing to the low copper prices on the international market, high production costs, liquidity problems requiring frequent bail-out from the government and lack of recapitalisation and subsequent fall in the country’s copper production.
Maamba mine was not producing significant coal to cover its operating cost, including the payment of staff salaries prior to the government’s decision to sale the mine to ZCCM – IH in order for it to recapitalise it and make it a profitable mining venture once again. To resume sustainable and profitable mining operations at Maamba, ZCCM – IH and MCL management considered two options.
These were procuring new mining equipment to replace the old and obsolete machinery to facilitate improved mining operations by MCL or engaging a contract miner who would bring in all the required mining equipment as an interim measure before finding an equity strategic partner to develop the mine.
The preferred option by management was to engage a mining contractor. In the initial bid for contract mining, Keren Mining Limited was picked as the mining contractor. However, because Keren failed to mobilise the required mining equipment and commence the operations as per contractual agreement, the contract was terminated in December, 2008. Keren was replaced by Scirocco Enterprises Limited which started mining operations in January, 2009.
In the period during which ZCCM – IH was sourcing for a contract miner, a loan of US$5.3 million was provided (by ZCCM – IH) to Maamba mine management to facilitate the resumption of operations. The Maamba Mine Board of Directors in March, 2008, approved the operation business plan that required the refinancing of mining operations at US$7,336,254. However, ZCCM – IH was only able to secure US$5.3 million.
The money was spent on mobilisation fee to contractor; fuels for operations; salaries and wages from August, 2008, to April, 2009; coal washing plant repairs and maintenance; ropeway repairs; weighbridge procurement; pit electrification; protective clothing; vehicles for operations; laboratory equipment; electricity from August, 2008, to April, 2009 and operating expenses from August, 2008, to April, 2009.
Coal production started in the last week of April, 2009, and continued uninterrupted for three months leading to ROM coal production total of 88,955 tonnes. During this period, overburden removal continued which included excavation of soft overburden, hard overburden and re-handling of previous operation in-pit dumped material.
As at October 2, this year, Maamba coal mine had on site 40,000 tonnes of washed coal equivalent, in value, to K16 billion ready for marketing and 8,000 tonnes raw coal worth K2 billion at the washing plant stock pile.
During the same period, MCL had 446 permanent employees and 105 on contract. This constituted 551 employees directly engaged with coal mine operations which is termed as core business. The other 75 permanent and 45 on contract constituted 120 employees engaged in the running of the private school, Izuma Lodge, training centre and township services.
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http://www.africanews.com/site/Zambian_ ... ages/27875
Posted on Friday 6 November 2009 - 09:36
Zambia’s largest and obsolete coal mine, Maamba Collieries Limited (MCL) which has been experiencing financial and production problems for many years has stepped up efforts to market its coal to raise revenue so as to quickly normalise operations and resolve the issue of salary arrears for employees.
Management at the Southern Zambia based mine has signed coal sales contracts with Lafarge, (formerly Chilanga Cement Company), for 10,000 tonnes worth K10 billion for delivery up to December, 2009, and Zambezi Portland Cement for 4,000 tonnes per month worth K1.2 billion every month.
Maamba management has also clinched orders from the Democratic Republic of Congo, (DRC), of about 4,000 tonnes worth K1.2 billion and Malawi for 3,000 tonnes worth K900 million. Apart from marketing the coal which is on site, the company is actively looking for other forms of finance in the interim and is committed to paying the salary arrears as soon as possible.
Zambia’s Mines Minister, Maxwell Mwale, said during the period from June to September, this year, the company had managed, from its constrained cash flow to pay salary advances to its employees. The advances that were paid were applied uniformly to all employees, including senior managers.
Prior to 2009, MCL had relied on borrowed funds from Zambia Consolidated Copper Mines – Investment Holdings, (ZCCM – IH), for staff salaries. It was envisaged that with the resumption of operations that started in the last week of April, 2009, Maamba mine would manage to meet its own obligations.
In the initial production phase, MCL had experienced difficulties in marketing the coal produced from its operations in time, giving rise to severe financial constraints leading the company’s failure to meet staff salaries and payment to the contract miner. MCL lost its traditional local market due to its unreliable coal production which led its customers to source for coal from producers outside the country.
The major consumers of coal were the smelters on the Copperbelt. However, with the change in smelting technologies, these smelters are not consuming huge quantities of coal as before. For example, the Nkana Smelter which used to consume huge quantities of coal for its smelting operations is on care and maintenance, having been replaced by a more modern plant at Nchanga which does not use coal.
Therefore, ZCCM –IH has been vigorously looking for a strategic equity partner for the development of Maamba mine and a thermal power plant at the mine to create a ready market for the coal.
The Zambia Development Agency, (ZDA), Negotiating Team, in line with the ZDA Act, is carrying out negotiations with the preferred bidders to partner with ZCCM – IH in the development of Maamba mine and thermal power plant. The negotiations are said to have reached an advanced stage and, once concluded, will be submitted to the Committee of Ministers prior to presentation to Cabinet before any announcement of the results of these negotiations can be made public.
MCL has been in existence as a mining entity for over forty years. Before the takeover by ZCCM – IH, the mine had produced about 15.2 million tonnes of Run of Mine, (ROM), coal. From inception in 1969 up to 1991, MCL operated a profitable mine venture.
However, from 1991 to date, the mine has faced ernomous financial and operational problems that have significantly affected its profitability and its concern status. Since 1991, the mining operations have been on and off and with insignificant production output and high cost structure. This prompted the government to sale 100% shares to ZCCM – IH in 2007 with a view to resuscitating the operations at Maamba.
The start of problems at Maamba coincided with operational difficulties of the Zambian copper mining industry in the period prior to privatisation. It was during this period that ZCCM was operating unprofitably owing to the low copper prices on the international market, high production costs, liquidity problems requiring frequent bail-out from the government and lack of recapitalisation and subsequent fall in the country’s copper production.
Maamba mine was not producing significant coal to cover its operating cost, including the payment of staff salaries prior to the government’s decision to sale the mine to ZCCM – IH in order for it to recapitalise it and make it a profitable mining venture once again. To resume sustainable and profitable mining operations at Maamba, ZCCM – IH and MCL management considered two options.
These were procuring new mining equipment to replace the old and obsolete machinery to facilitate improved mining operations by MCL or engaging a contract miner who would bring in all the required mining equipment as an interim measure before finding an equity strategic partner to develop the mine.
The preferred option by management was to engage a mining contractor. In the initial bid for contract mining, Keren Mining Limited was picked as the mining contractor. However, because Keren failed to mobilise the required mining equipment and commence the operations as per contractual agreement, the contract was terminated in December, 2008. Keren was replaced by Scirocco Enterprises Limited which started mining operations in January, 2009.
In the period during which ZCCM – IH was sourcing for a contract miner, a loan of US$5.3 million was provided (by ZCCM – IH) to Maamba mine management to facilitate the resumption of operations. The Maamba Mine Board of Directors in March, 2008, approved the operation business plan that required the refinancing of mining operations at US$7,336,254. However, ZCCM – IH was only able to secure US$5.3 million.
The money was spent on mobilisation fee to contractor; fuels for operations; salaries and wages from August, 2008, to April, 2009; coal washing plant repairs and maintenance; ropeway repairs; weighbridge procurement; pit electrification; protective clothing; vehicles for operations; laboratory equipment; electricity from August, 2008, to April, 2009 and operating expenses from August, 2008, to April, 2009.
Coal production started in the last week of April, 2009, and continued uninterrupted for three months leading to ROM coal production total of 88,955 tonnes. During this period, overburden removal continued which included excavation of soft overburden, hard overburden and re-handling of previous operation in-pit dumped material.
As at October 2, this year, Maamba coal mine had on site 40,000 tonnes of washed coal equivalent, in value, to K16 billion ready for marketing and 8,000 tonnes raw coal worth K2 billion at the washing plant stock pile.
During the same period, MCL had 446 permanent employees and 105 on contract. This constituted 551 employees directly engaged with coal mine operations which is termed as core business. The other 75 permanent and 45 on contract constituted 120 employees engaged in the running of the private school, Izuma Lodge, training centre and township services.
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http://www.africanews.com/site/Zambian_ ... ages/27875