British tycoon Nicholas van Hoogstraten planned to give global commodities giant Glencore Plc a management contract to turn around Zimbabwe’s struggling Hwange Colliery Company as part of a $50 million rescue package in 2013, a local financial newspaper reported today.
van Hoogstraten owns 30 percent of Hwange, Zimbabwe’s oldest coal miner. The government of Zimbabwe is Hwange’s largest shareholder with 37 percent. Other notable shareholders include Mittal Steel Africa, part of the ArcelorMittal group, with 10 percent and Jindal Steel, with less than one percent.
The tycoon, a key investor across several sectors in Zimbabwe’s economy, told the private Financial Gazette he would have wanted Glencore to manage Hwange, whose pre-tax losses widened from $44 million in 2013 to $56 million last year.
“The management contract would go to Glencore,” van Hoogstraten is quoted saying.
“That is what I had proposed. I would place $50 million to recapitalize and re-equip Hwange but because I am not a miner, I was going to bring a major miner like Glencore. That is the one I had chosen.”
The Hwange board, with the backing of largest shareholder government, baulked at van Hoogstraten’s terms, which would have entailed a board and management purge.
Hwange management is also reported to have objected to the financial terms of van Hoogstraten’s offer – 10 percent interest per year, three percent of turnover and 17 percent of yearly profits.
While van Hoogstraten partly got his way – getting his board appointments approved while only the chairman survived from the old board – Hwange, looked elsewhere for cash and got credit facilities amounting to $31 million from the PTA Bank ($18 million) and Export and Import Bank of India ($13 million) for the purchase of mining equipment from Belarus and India.
However, van Hoogstraten doesn’t seem overly impressed, telling the Financial Gazette with customary disdain:
“The company can be turned around in less than one year (but) why do you buy Mickey Mouse equipment from Third World countries? It is because there is big under-the-counter corruption going on.”
During the commissioning of the equipment last week, management indicated it expected production to rise from the average 150 000 tonnes per month reported in FY14 to 450 000 tonnes per month this year.
Last year, Hwange signed up Portuguese mining contractor Mota Engil to produce 200 000 tonnes per month. The Portuguese firm is reported to be meeting the target.-The Source