By Business Reporter – Thursday 7 May 2020
HARARE (Mining Index) – RIOZIM says it has re-embarked on a US$17 million capital project towards the construction of a Biological Oxidation Plant (BIOX) at its Cam & Motor Mine which had been earlier stalled due to lack of funding.
RioZim says the 55 percent foreign currency retention falls short of the Company’s operational and capital expenditure requirements considering that the Company is required to pay for electricity and fuel in USD over and above other local costs.
The use of the BIOX technology is expected to increase production by at least 50 percent.
“The BIOX plant project at Cam and Motor Mine is underway and is scheduled to be commissioned in the fourth quarter, should the Company successfully secure the prerequisite foreign currency,”
“Structural steel fabrications are in progress after deposit payments were made during the year. Mechanical installations phase is scheduled to start during Q2 2020 and the BIOX plant was expected to be commissioned in the fourth quarter of 2020,” said RioZim in its abridged audited group financial results for year ended 31 December 2019.
The company says civil works for the project have progressed to 30 percent as at reporting date.
The commissioning timeline was however, highly dependent on the Company securing foreign currency, which remains the biggest risk threatening the project.
The life of mineable resources at One Step to feed the Cam & Motor plant during the construction phase of the BIOX plant is around nine months, after which production at Cam & Motor will come to a complete halt if the BIOX plant is not commissioned within the set timelines.
“The Company is, however, looking at ways to continue exploration activities at One Step mine to extend the life of mineable resources and safeguard the going concern of the Group” the company said.
“With the current foreign currency shortfalls be-deviling the Company due to inadequate foreign currency retention of only 55 percent, and the uncertainties on the BIOX funding, the Group’s ability to fund its capital development and exploration activities at each mine is significantly in doubt,” said RioZim.
RioZim embarked on various capital raising initiatives during 2019 to fund the completion of the BIOX Plant which holds the future of Cam & Motor Mine.
Among these initiatives include approaching the Company’s bankers and other financial institutions and financiers both local and foreign for possible USD funding, with negotiations at varying levels as at December 2019.
As at reporting date, all the fund raising activities RioZim was pursuing were not yet binding and hence remain uncertain. This is further complicated by the outbreak of COVID-19, which has forced lockdowns in South Africa and Zimbabwe.
At the last Annual General Meeting, RioZim sought to increase its authorised share capital in order to raise capital in USD.
This resolution was opposed by Old Mutual. Since then the Company has been working with Old Mutual to find a solution that would allow the Company to raise capital in USD but has not been able to arrive at any conclusion due to Old Mutual’s inability to raise USD to fund the capital project and its probable hesitance to be diluted.
“Meanwhile, the Company’s principal shareholders and their affiliates have funded the Company to the extent of USD11 million in the form of foreign currency loans which they are willing to convert to equity and bring further capital but are constrained by unavailability of sufficient authorised share capital as mentioned above,” said RioZim.
In this regard management prudently excluded the undeveloped resources in the estimation of the Life of Mines as at year end as these require funding for them to be brought to mineable reserves.
In the outlook, the Group remains committed to pursuing growth opportunities which generate free cash flows and yield positive returns. To this end the Group will continue with its drive to invest in exploration activities and capital projects that will create long-term sustainable value for the Company. ENDS// www.miningindex.co.zw
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