By Business Reporter – Tuesday 16 June 2020
HARARE (Mining Index) – RIOZIM says it has stopped gold production owing to limited foreign currency retention which falls short of the Company’s operational and capital expenditure requirements.
The inter-bank foreign exchange rate has remained lower, trading at a fixed rate of US$1:ZW$25, against the black market rate, now trading at US$1:ZW$100.
RioZim says it is required to pay for various costs such as electricity, fuel and salaries in USD, making it perennially short of foreign currency to sustain its operations and growth prospects.
In its previous statements, RioZim clearly stipulated its future hinges on 100 percent foreign currency retention.
The halt in bullion production is also due to its inability to buy essential consumables and spare parts, and is actively considering placing all its gold mines on care and maintenance until a viable solution is found.
RioZim also cited delays in receipt of gold proceeds from the Reserve Bank of Zimbabwe (RBZ).
“The Directors of RioZim Limited wish to advise the Company’s shareholders and the investing public that the Company is currently facing severe challenges arising from a major discrepancy between its expenses and receipts for its gold production,”
“This is being driven by a combination of the fixed exchange rate mechanism and the limited retention of foreign currency being made available to it. The Central Bank’s policy is that gold producers are entitled to access only 70% of their gold proceeds in foreign exchange in their Nostro Account and the balance of 30% in Zimbabwean Dollars (‘ZWL’) at the prevailing fixed interbank rate. The interbank rate has been fixed at ZWL25:USD1 while the real market purchasing power of the United States Dollars (“USD”) is allegedly hovering around 80:1,”
“This effectively means that the Company is selling 30% of its USD at a rate of 25:1 while the market and the Company’s suppliers are pricing goods at in excess of 80:1. This payment mechanism essentially means that the Company is getting less than 80% for its gold production compared to the international market price,” said RioZim.
With effect from the 26th May 2020, Fidelity reviewed upwards to 70:30 the gold payment arrangement scheme for Large Scale Miners (LSM) where gold sale proceeds are now being paid into the producer’s Nostro account and the balance of 30 percent payable in local currency at the prevailing exchange rate into the producer’s ZW$ account.
Previously, gold miners, both LSM and artisanal and small-scale miners (ASM) were receiving 55 percent of their gold deliveries in foreign currency while 45 percent was paid in local Zimbabwean dollars.
“The impact of this situation on the Company’s operations has been that the Company is no longer able to meet its operational expenditure requirements considering that the company is required to pay for electricity and fuel in USD along with almost all of its consumables and spares also being denominated in USD,”
“Part of the salaries of employees are also paid in USD making it impossible to make ends meet. This means that the Company does not have sufficient foreign currency to sustain its operations let alone fund growth. Employees are also refusing to be paid any ZWL and if paid in ZWL they are insisting that they are rated at the so called “market exchange rate”. The 30% local currency being availed at circa 75% discount to its real market worth, without overemphasising, is grossly inadequate to sustain operations,” said RioZim.
The mining giant says it has engaged with the Government and other relevant authorities and continues to do so but has made no progress so far. These developments and the consequences thereof will have a materially adverse impact on the Company’s performance. ENDS// www.miningindex.co.zw
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