Diversified Zimbabwe Stock Exchange (ZSE) listed miner, RioZim Limited, has suspended production at three of its gold mines citing shortage of foreign currency needed to import critical consumables and spare parts.
RioZim said in a letter to Reserve Bank of Zimbabwe Governor Dr John Mangudya, signed by board chair Lovemore Chihota, that it had stopped operations at Cam and Motor in Kadoma, Renco Mine in Masvingo and Dalny Mine in Chegutu over crippling shortage of foreign currency.
Mr Chihota said RioZim had received only 14 percent of its gold delivery proceeds in the last 30 months instead of the RBZ directive of 50 percent direct access to its nostro (forex) funds and 50 percent by application.
He said RioZim had not received any foreign currency in the nine weeks preceding the suspension of production, which started with Dalny Mine on October 19, then Cam and Motor and Renco three days later.
"As you will agree, this disruption is very harmful to us all that is; our employees, our creditors, the Government of Zimbabwe along with all other stakeholders.
"However, we very much hope that this stopping of production is temporary and that we will resolve the issues currently facing us as we continue to engage yourselves and hope that at the end of it we shall come out stronger to the benefit of all stakeholders," Mr Chihota said.
This comes after Zimbabwe's biggest gold miner, Metallon Gold, also recently closed shop at one of its major gold mines - Mazowe - amid foreign currency constraints and mounting debts.
Government, after meeting South African owner and business mogul, Mzi Kumalo, pledged all critical facilitation to avoid the firm going down on its knees. The central bank withholds part of gold miners' export proceeds to support critical national needs such as fuel imports.
The equivalent of foreign exchange component withheld, as Zimbabwe battles forex shortage amidst extensive competing critical needs, is paid in bond notes - a local legal tender - or real time gross settlement (RTGS).
The gold miner has since appealed for intervention by the RBZ chief to be allowed 100 percent retention of proceeds in the first bullion after restart to claw back ground lost in the last nine weeks and restock critical spares.
RioZim has also asked to be allowed to retain 60 percent of delivery proceeds every week thereafter to support operations, after the bank agreed to 50 percent retention prior to its midterm monetary policy review, while the 10 percent balance would be channelled towards capital programmes.
The company also implored RBZ to facilitate access to foreign currency for what it calls "mission critical growth projects through Letter of Credit".
"To date we have invested more than $30 million at Cam and Motor. In order to sustain and indeed further increase production, we now need to invest an additional $15 million for Biox, without which Cam and Motor has no life going forward and production there will collapse to zero as you are already aware," Mr Chihota said yesterday.
RioZim said if Government extended the support it has requested; it would be back to producing 165 kilogrammes per month (Cam and Motor 60kgs, Renco Mine 60kgs, Dalny 45kgs) from zero production.
Thereafter, Mr Chihota said, RioZim could expand production to 300kgs per month (Cam and Motor 180kgs, Renco 75kgs and Dalny 45kg) after two years when it would have commissioned Biox and Renco Mine expansions.
RioZim said it was committed to preserving around 2 600 jobs at the group, creating new employment, supporting larger local communities, generating more foreign currency and contributing to the fiscus.
The company was incorporated on August 29, 1956 as Rio Tinto Southern Rhodesia Ltd. It was set up initially to develop and mine the Empress Nickel deposit in the Midlands and was the first mining operation to be set up outside Europe by Rio Tinto plc.
RioZim separated from Rio Tinto plc in 2004 and became a wholly owned Zimbabwean company that produces gold, coal, toll refines nickel and copper.