RioZim misses out on gold price rally

RIOZIM has lost millions of dollars in potential revenue due to subdued output at a time international gold prices have enjoyed a sustained rally.
Saleem Beebeejaun, RioZim’s board chairman, said the company realised an average gold price of US$1 346 per ounce during the six months to June 2019, up from US$1 298 in the previous comparable period.
Even though the company’s revenue increased by about 200 percent to $136,7 million, Beebeejaun said more could have been achieved.
“This low revenue achievement is mainly attributable to the decrease in gold production associated with the incessant power cuts experienced during the period under review,” he said.
“These incessant power cuts which commenced in the second quarter of the year significantly affected production. As a direct result of these power cuts, the group, recorded a decrease in its production by eight percent to 962kg from 1 050kg achieved in the comparative period in 2018,” he said.
And while gold prices have continued to surge since June, picking up from about
US$1 300 per ounce to about US$1 500 in October, the power situation in Zimbabwe has not improved much.
“Power supply deficit remains a key risk in the second half of 2019. Even though the company is paying for uninterrupted power supply in United States dollars, the group continues to experience intermittent load shedding,” Beebeejaun said.
National power utility Zesa Holdings said it has been forced to implement the rolling power-cuts after losing generation capacity at its flagship Kariba plant due to drought and constant plant breakdowns at Hwange.
The State power utility has not been able to import enough power to cover the deficit because of the foreign currency shortages bedeviling the country.
Meanwhile, RioZim has continued to face challenges accessing foreign currency.
Beebeejaun said the listed miner is now back to paying for almost everything in United States dollars, which are in scarce supply on the local market.
“This is impacting working capital, maintenance and expansion capital expenditure.
“In the absence of either being allowed to retain and use 100 percent of its export proceeds or raise and use United States dollars from shareholders, the company’s position will continue to be extremely challenging,” he said.
In 2018, the company was on two occasions forced to close its gold mines due to lack of foreign currency.
Still, the firming up of the gold price during the period under review provided a cushion on the lower production volumes.
“The company also benefited from the combined effect of lower costs in United States dollar terms for its very limited Zimbabwean dollar-denominated costs which resulted in the group recording an operating profit of $46,9 million,” Beebeejaun said.
“It is to be noted, however, that a substantial amount of the company’s costs is being converted back into United States dollar terms and, therefore, it is expected that there will be future pressure on the bottom line of the group with costs increasing,” the chairman added.

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