By Business Reporter
HARARE (Mining Index) – MINING concern, RioZim recorded a 13 percent decrease in gold production, with the group posting a US$2.3 million loss in the year ending December 2018.
In October last year, RioZim threatened to take legal action against the Reserve Bank of Zimbabwe (RBZ). This followed RioZim’s temporary closure of its gold business units; Cam & Motor, Renco and Dalny mines after the central bank failed to comply with its directives and policies in allocation of foreign currency which crippled the company’s ability to fund its operations and sustain its growth prospects.
RioZim noted that since 2016 to October 2018, the company had only been allocated an average of circa 15 percent of the foreign currency it generated.
“As a result of these challenges, a whole two month’s production was lost albeit the fact that the Company continued to meet all of its fixed costs and thus driving the business down a path of operating losses,” said RioZim board chairman Lovemore Chihota.
RioZim’s action led to the foreign currency retention review which saw large scale miners retaining 55 percent of foreign currency from mineral exports to allow them recoup production costs, up from 30 percent of their export proceeds which they were previously getting, with the balance of 45 percent retained by government.
“The resumption of operations was only made possible after an upward review of forex retention to 55%, and the release of payments towards suppliers. At the same time, although a forex retention of 55% was theoretically sufficient to meet the Company’s immediate operational expenditure needs and requirements, the remaining 45% of the Company’s gold export proceeds were paid in local RTGS currency at a rate of 1:1 with the USD, notwithstanding the fact that the prevailing parallel market was as at October trading at a rate of circa USD 1: RTGS$ 4, and all local suppliers had adjusted their prices to these exorbitant parallel market rates.”
Chihota said the greater part of the second half of 2018 saw the RioZim effectively selling 45 percent of its gold production at 25 percent of its value.
“Consequently, due to these macroeconomic factors and difficulties, gold production for the year regressed by 13% to 1.792 tons which is less than the 2.071 tons achieved in the prior year,” he said.
“Therefore, as a result of these challenges, the Group recorded a net loss of USD 2.3 million for the year. Regrettably, this demonstrated a negative growth when compared to the net profit of USD 8.1 million which the Group had posted in the prior year on the back of various growth strategies which it had implemented in the year 2017,” he said.
Cam and Motor Mine faced a 22 percent slump from 2017, producing 458kg of gold in the first half of 2018 closing the year with a total production of 758kg.
Renco Mine also suffered a 22 percent output decline with an annual output of 591kg, where 61 percent was produced in the first half of 2018.
However, Dalny Mine saw an 8 percent increase from 2017 recording an annual output of 442kgs, largely attributed to the company’s investment in exploration and development in the previous year which resulted in improved availability of ore sources with higher recoveries.
“Improved milling also underpinned the strong performance. Shortages of foreign currency resulted in the delay of scheduled underground mining at the mine which would have further increased production. As a result, the mine could not access the rich underground ore resource, leading to lower grades of 2.57g/t against grades of 2.65g/t achieved in 2017,” said Chihota. ENDS//