RioZim loses $5m in mine standoff

HARARE - Listed mining concern RioZim Limited (RioZim) says it lost a staggering $4,5 million due to disruptions at its Masvingo-based Renco gold mine.

Renco’s operations ground to a halt after what started off as a salaries and benefits strike by the mine’s workers’ wives in January, turned political with Zanu PF Chivi South MP, Irvine Dzingirai taking over operations.

Following the labour unrest, Dzingirai declared himself Renco’s general manager while his party colleague Tourism minister and Masvingo south legislator Walter Mzembi was also involved in the operational disruptions.

This prompted RioZim to seek a court order to bar the two from the Masvingo-based mine.

However, despite the disruptions at the mine RioZim remains upbeat about its future operations in the country.

“I sincerely believe that RioZim will soon return to its rightful place as one of this country’s blue chip institutions, supporting employment and growth across the country,” said group chairperson Elisha Mushayakarara.

Zimbabwe’s mines are slowly recovering from a slump in 2008 at the height of the country’s economic crisis, which saw inflation surge to 500 billion percent and left the country’s currency worthless.

In the full year to December 2012, RioZim — from which Rio Tinto Plc divested in 2004 — recorded a $5,5 million loss due to high borrowing costs that were at $11,9 million.

Mushayakarara noted that in the period under review the group’s current liabilities exceeded its current assets by $17,6 million as a result of short-term borrowings of $44,5 million.

“These factors would ordinarily point to a material uncertainty in the ability of the group to continue as a going concern,” he said adding that the directors of the company see a change of fortune in the near future.

“The group is in the process of restructuring itself into a listed holding company, with a number of wholly-owned subsidiaries that group assets along commodity lines.

“This will allow the injection of capital and corporate activity to grow each subsidiary into a significant stand-alone business,” said Mushayakarara.

RioZim is planning to put different lines of business into sub-units which would be 51 percent indigenised, with the remaining 49 percent used to acquire capital.

The sub-units will be Rio Gold — which will own Renco, Cam and Motor, and all other group gold assets.

Rio Base Metals will own the Empress Nickel Refinery and all related base metal assets, while Rio Diamonds will own Murowa and all other diamond-related assets.

Rio Energy will own Sengwa Colliery assets, including a potential power plant, and Rio Chrome which will own 60 percent of RM Enterprises and all related chrome assets.

Mines operating in the country continue to suffer from increasing power cuts and lack of capital, with foreign lenders withholding funding until the government implements political and economic reforms.

In the period to December 2012, RioZim’s bank debt, which stood at $57,2 million in 2011, decreased to $45,6 million and is expected to decrease further in 2013 as the group’s facilities are being restructured.

Mushayakarara said part of the group’s debt which is in short-term is in the process of being re-arranged to between 24 months and 36 months adding that “a portion of it has already been rescheduled”.

“Creditors including financial institutions remain supportive through credit lines and shareholders remain strongly supportive of management’s efforts to improve productivity,” he said.

RioZim operates Renco gold mine and Empress Nickel Refinery (ENR) and has also interests in gold mining at Cam and Motor in central Zimbabwe.

RioZim also owns 22 percent in Murowa diamond mine, with the remainder held by Rio Tinto.

Last year the group registered significantly improved performances with Renco producing 18 percent more gold and a 66,9 percent increase in operating profit.

ENR, despite being closed for half the year during the termination negotiations, managed to generate an operating profit of $0,5 million from a small loss the previous year. - John Kachembere

Comments (1)

Its just a matter of Working Capital but Assets are there plenty.

Emperor - 7 September 2013

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