RioZim in Sengwa due diligence

HARARE - Listed diversified resources group RioZim says it carrying out a due diligence exercise to produce an initial 150 megawatts (MW) at its Sengwa thermal power station project.

Ashton Ndlovu, RioZim’s chief executive, said the group was considering various options to fund the first phase of the Sengwa power plant — targeted at producing a total 2 000MW on completion at approximately $3 billion.

The project is expected to take up to 10 years.

“The project phase one is still being evaluated. The announcement (project value and commencement) will be made at the appropriate time,” he told businessdaily, but could not disclose the project’s funding sources.

The Sengwa power plant is based on a 1,5 billion tonnes coal resource, capable of sustaining up to three 2 000MW power plants.

This development comes amid concerns that RioZim is failing to initiate the power station project due to financial constraints stemming from a $91 million debt and failure to attract fresh capital from investors and technical partners.

RioZim currently seeks funds for recapitalisation and debt retirement.

The miner will later this month ask shareholders at its annual general meeting to approve a total $7 million in debts taken beyond its borrowing limit.

Analysts say this represents one of only a few options the company has in terms of raising funds to support operations.

RioZim almost went into judicial management last year as banks, owed more than $40 million, sought to recover their funds.

Its short-term loans have since been restructured into 24 to 36 months tenure.

“The board of directors hereby requests the ratification of the said excess by way of an ordinary resolution,” RioZim said in a statement.

In addition, directors would seek shareholders’ permission to borrow $10 million beyond the Zimbabwe Stock Exchange-listed mining company’s borrowing limits.

“The board is (also) requesting, until the next annual general meeting, authority to exceed the borrowing limit, as stipulated in the company’s articles, by an additional amount in the sum of $10 million, if need arises,” RioZim said.

Further, directors will seek shareholders’ approval to extend authority granted at a 1994 AGM to issue up to 10 percent of unissued ordinary shares without the same being first given to ordinary shareholders of the company.

Mining operations are, by nature, expensive, meaning the $11,6 million the firm raised through a rights offer and private placement remain insufficient    for working capital and new projects.

RioZim has a number of strategic initiatives lined up for 2013, including expanding operations, but the projects require huge capital outlays. - Kudzai Chawafambira

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