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RioZim slips into the red, posts $2.3 mln loss as forex constraints weighs down on operations

Almot Maqolo

HARARE – Zimbabwe resources group, RioZim Limited slipped into a $2.3 million loss in the year ended December 31, 2018 from a profitability position in the comparable period in 2017 owing to fixed costs incurred and the halting of gold business operations.

In 2017, the miner posted an after tax profit of $8.1 million. The continued shortage of foreign currency in the country is making it difficult for industries to procure imports.According to a statement of the financials, group revenue dipped 15% from $89.9 million in 2017 to $75.4 million. This was attributed to low production volumes in the second half of the year and the inability to complete planned capital projects due acute shortages of foreign currency – which would have sustained and increased production.

Net cash from operations went down from $13 879 million in 2017 to $10,482 million. Operating profit declined 71% from $8.1 million to $2.4 million. EBITDA went down 66% to $4.5 million from $13.4 million previously.

Chairman Lovemore Chihota said the stipulated foreign currency allocation to the mining industry, persistently remained far below the specified retention levels which were set by the Reserve Bank of Zimbabwe (RBZ) from time to time. He said this set the stage for a very difficult operating environment and an inability to procure necessary stocks from critical foreign suppliers.

“The situation, however, worsened as the year progressed and reached unprecedented levels as was depicted by the involuntary shutdown of all mining operations by the company’s gold business units in the fourth quarter.

“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,” he said.

He said 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,” he said.

For a greater part of H2, the group effectively sold 45% of its gold output at only 25% of its true value.In October 2018, there was chaotic market reaction to the 2% tax transaction and the separation of accounts which resulted in price distortion and panic buying. African Sun’s business is 50%+ local – so it was not possible to solely price in US Dollar.Gold output declined 13% from 2.071 tons in the previous period to 1.792 tons.

Gold prices averaged $1247/Oz faring slightly better than the levels of $1242/Oz realised in 2017.Cam & Motor mine produced 758kgs of gold, representing a 22% declined when compared to same period in 2017.

Due to a depletion of amenable oxide ores and an upsurge in refractory ore – which cannot be effectively treated with traditional carbon-in-leach process – recoveries declined from 77% to 65%.

The group is in the process of developing a Biological Oxidation (BIOX) Plant in order to treat the refractory ore reserves. However, the project has been stalled by the acute shortages of foreign currency. Once operational, the BIOX is poised to enable the company to double its output.

Renco mine gold output plunged 22% to 591kgs. However, Dalny mine yellow metal output rose 8% to 442kgs. Empress Nickel Refinery (ENR) remained under care and maintenance through the year.

Murowa Diamond reported a net profit of $10 million – contributed $1.5 million to the group as a share of profit. Diamond production rose 740,244 carats from 732,045 carats in 2017.

RioEnergy – the company has made strides in the Sengwa Power Station Project which entails the development of a 2,800MW power station in phases of 700MW each.

However, the company has set ambitious targets for 2019 which will culminate in the project kickoff in the next 12 months.In the outlook, the group said it will continue to engage the RBZ, to change the current policy framework such that it can return a higher percentage of its foreign currency that it generates from selling of its gold.

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