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RioZim’s future hinges on 100 percent forex retention

“With 50% of the foreign currency earnings being retained by the Reserve Bank of Zimbabwe and operational expenses having to be met mainly in foreign currency, the mismatch between availability of foreign currency and the use thereof, leaves no room for the Company to plan and provide for the much needed capital investment without which long term prospects for the Company will almost certainly cease to exist.”

By Business Reporter – Friday 10 January 2020

HARARE (Mining Index) – RIOZIM says the future and success of its mining operations is dependant on the company being able to retain 100 percent of its foreign currency earnings to enable it to plan and provide for capital investment, without which its long term prospects will almost certainly cease to exist.

“The future of the Company hinges on it being able to retain its entire foreign currency, securing stable and consistent power supply and retention of its skilled personnel,” said the company in its 2019 third quarter trading update for the three months ended 30 September 2019.

Current Zimbabwean laws, as gazetted by the central bank in February 2019 state that miners, especially in the gold sector, retain 55 percent of foreign currency earnings while government pockets 45 percent.

RioZim said the operating environment continued to be challenging in the fourth quarter of 2019, citing unreliable and low quality power, acute foreign currency shortages, perceived high country risk and soaring cost of local inputs including cost of living allowances as major bottlenecks to its operational viability. Output in both its gold and diamond producing units dwindled in the period under review.

“The operating environment continued to be extremely challenging characterised by a surge in local prices, fuel shortages, power cuts and lack of adequate tooling and spares due to insufficient foreign currency retention,” said RioZim.

Turning to its diamond producing unit, the group said Murowa Diamonds continued on a path towards an attempt to stabilize production.

“Unfortunately, the diamond business faced the same set of exogenous challenges as the gold operations.”

“With 50% of the foreign currency earnings being retained by the Reserve Bank of Zimbabwe and operational expenses having to be met mainly in foreign currency, the mismatch between availability of foreign currency and the use thereof, leaves no room for the Company to plan and provide for the much needed capital investment without which long term prospects for the Company will almost certainly cease to exist,” said RioZim.

The transition at Cam & Motor Mine to processing One Step ore which is of lower grades resulted in a seven percent slump in production to 145kgs, compared to 169kgs achieved in the same period in 2018. The Biological Oxidation (BIOX) plant project progressed during the period albeit slowly, due to acute foreign currency shortages which are affecting project timelines.

Dalny Mine’s production capacity was reduced to below 60 percent due to acute load shedding despite the Mine continuing to pay for uninterrupted power supply in US Dollars. As a consequence of the power cuts, production fell by 39 percent to 78kgs from 128kgs recorded in the same period in 2018.

Renco Mine achieved 143kgs which is 91percent of comparative period production of 158kgs. The lower production volumes were a result of intermittent load shedding experienced during the period.

“The Group’s energy projects are progressing however under an extremely difficult environment to attract financiers due to a perceived high country risk. Support has however been sought from relevant authorities,” said RioZim.

Empress Nickel Refinery (ENR) remained under care and maintenance during the pNkomo – RioZim Chief Executive Officereriod under review.

The Company’s chrome claims in Darwendale remains subjudice and RioZim continues to pursue finalisation of the matter by the courts. ENDS// www.miningindex.co.zw

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