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A VFEX listing could help ease RioZim’s worries

Gold producer RioZim could join the Victoria Falls Stock Exchange (VFEX), where miners are attracted by tax breaks offered for listing on the USD-denominated market.

But a VFEX listing could ease part of RioZim’s problems, but not all of them.

RioZim is “seriously considering all options available to it under the legal framework of the country and will move in consonance with such opportunities,” Bloomberg quoted spokesman Wilson Gwatiringa as saying on Thursday. But, he added: “Any decision to list on the bourse would require shareholder approval, which has “neither been proposed or voted upon.”

VFEX Chief Executive Officer Justin Bgoni said the bourse expects more companies “especially in the mining sector,” to list.

If RioZim does go to VFEX, it would join Bindura Nickel, Padenga and Caledonia, the other miners that have listed there.

Among other tax incentives, companies that list on VFEX get to keep 100% of what they earn from any gold they sell above their average monthly output. The more gold they produce, the more they can earn from their exports.

The question will be whether RioZim can put itself into position to take advantage of the incentives.

A combination of ageing mines and a hostile foreign currency regime have hit old gold output. The company temporarily shut down its mines in 2018 and 2019, protesting unremitted gold earnings and forex laws that compel miners to sell a portion of their sales to central bank in local currency.

‘We can’t sustain operations’: RioZim, miners warn RBZ over currency regime, payment delays

Last year, the company estimated it was losing around 55% of its revenue to the retention scheme and other payments.

“The ZWL thus received, at the official exchange rate, had a purchasing power of almost half of what the Company receives,” RioZim said in November. “In effect the company loses about 25% of its revenue altogether.”

RioZim production
The listing may ease a part of RioZim’s forex headache, but a bigger worry for the company is the state of its mines and resource.

RioZim was among Zimbabwe’s biggest gold producers just a few years ago. But its mines are old and break down often, while the quality of its ore is among the poorest of major players in the industry. This means RioZim will struggle to grow its output enough to take full advantage of the VFEX incentives.

In 2020, RioZim’s three gold mines produced 1.2 tonnes, down 27% from 2019. Caledonia, meanwhile, now produces 1.9 tonnes from just its one mine, Blanket, up from 1.6 tonnes in 2020.

Through the quarter to the month of November, RioZim’s Cam & Motor mine processed low-grade ores. This saw production falling 31% from the same quarter in 2020. Renco Mine in Masvingo, which has suffered from low-grade ore for years, managed just 1% production growth in the quarter.

To fix its problems, RioZim has been looking to invest in a BIOX plant at Cam & Motor. This is a special plant which would allow the mine to treat refractory ore. This type of ore needs special bacteria to extract the gold from sulphides. The company had planned to complete the plant in 2021, but faced delays over cargo movements and forex. – (Newzwire)

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