Zimbabwe’s Biggest Coal Miner Plans $1.5 Billion Power Plant

Makomo Resources (Pvt) Ltd., Zimbabwe’s largest coal producer by output, said it plans to spend $1.5 billion on a 600-megawatt power plant and will also start exporting the fuel to steelmakers in southern Africa.

Construction of the plant will start in 2018, Finance Director Tendai Mungoni said at the company’s mines in Hwange, about 730 kilometers (454 miles) west of the capital, Harare. Makomo will finance the plant together with Chinese investors he declined to identify, he said on July 14.

Companies including Sinosteel Corp.’s Zimasco plan to build power plants in the country, which doesn’t generate enough for its needs. Zimbabwe, with the biggest known reserves of platinum after neighboring South Africa, has coal resources of as many as 15 billion metric tons, government estimates show.

“We expect to spend about $1.5 billion on that power plant,” Mungoni said. “We have lined up very keen investors, some from the region, some offshore -- the Chinese.”

Makomo is 60 percent owned by a group of Zimbabweans, while British and South African investors hold the rest, he said, declining to provide more information. The country mined 4.9 million tons of coal last year, with Makomo’s output comprising 75 percent of that, overtaking Hwange Colliery Co. as the largest producer of the fuel, according to the country’s Chamber of Mines. The nation’s royalty on coal production is 1 percent.

Plant Supply

Makomo has a contract to supply 60,000 tons of coal monthly to the state-owned Hwange power plant, the nation’s biggest such facility, with 920 megawatts installed capacity. Zimbabwe Power Co., which operates the station, asked Makomo to double supply for June and August, Mungoni said. It also supplies 10,000 tons monthly to the country’s three smaller thermal plants.

Zimbabwe is expanding power-generation capacity to curb blackouts that have paralyzed mines and industry. It produces an average of 1,300 megawatts of power, compared with peak demand of 2,200 megawatts, resulting in daily rationing and electricity cuts.

Makomo plans to raise monthly capacity to as many as 350,000 tons monthly by the end of the year from about 250,000 tons now.

It has started talks with the state’s National Railways of Zimbabwe to finalize the transportation of the coal, he said.

Makomo wants to start exports of coking coal, used in steelmaking, moving 20,000 tons this month and increasing this to 80,000 tons from August, he said.

Coking Exports

“Currently, it’s going to be regional -- South Africa, Zambia, thereabouts,” Mungoni said. “With time, we intend to see how that launch goes, we intend to go further afield.” He declined to disclose the names of the clients it has reached agreements with.

The price of coal leaving the South African port of Richards Bay, which has the world’s biggest terminal for the fuel, has declined annually since 2011 and has dropped 11 percent this year to about $74 a ton.

Makomo started operating the mine, which has a 25-year lifespan, in October 2010. While Zimbabwe granted the company a permit to operate on a 7,000-hectare (17,300-acre) site, it is using 500 hectares now, employing about 600 workers from 10 when it started, Mungoni said. The company has used $200 million since starting and had no plans to start trading its shares on an exchange.

“It hasn’t been easy, but it also hasn’t been hopeless,” he said. “We have had to come together with our anchor customer to navigate these times together whilst taking cognizance of the need for electricity generation. By and large the conditions have been challenging and have tested us as Zimbabweans.”

To contact the reporter on this story: Godfrey Marawanyika in Harare at gmarawanyika@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Ana Monteiro, Alex Devine

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