Zimbabwe: Riozim Profit Tops $38m

6 November 2019

Diversified resources group, RioZim Limited, posted a profit after tax of $38 million for the half year to June 30, 2019 despite the challenging macro-economic environment. Revenue came in at $136 million while basic earnings per share stood at 31,42 cents. Assets grew to $1 billion.

Comparative prior year figures were, however, in United States dollars making comparison with the reported Zimbabwe dollar earnings distorted.

The period under review witnessed several policy pronouncements that had a knock-on effect on businesses across sectors. RioZim was not spared.

Group chairman Saleem Rashid Beebeejaun, however, indicated that some of the policies enabled RioZim to get a slightly better realisation of the value of its export proceeds at close to market price.

Key among the policy pronouncements were liberalisation of the exchange rate, introduction of local currency as well as abolishment of use of the multi-currency system.

"The regulatory pronouncements made in the current year have had a negative impact on the performance of the company during the period under review.

"The period remained extremely challenging locally from a macro-economic perspective with the continued deterioration of the local Zimbabwean currency, high inflation, and fuel shortages," said Mr Beebeejaun.

Erratic power supplies also added to industry woes which resulted in an 8 percent decline in production to 962kg from 1 050kg achieved in the prior year comparative period.

At Cam & Motor Mine, gold production rose 7 percent to 489kg on the back of processing of pure oxide ores with good grades and higher recoveries.

To guarantee continuity of oxides while the mine is in the process of constructing its Biological Oxidation (BIOX) plant to treat refractory ore, the mine will source ore from the group's One Step Mine which is within the proximity of the current Cam & Motor mine processing plant.

Gold production at Dalny Mine went down 7 percent to 215kg as power cuts persisted reducing production time to as little as four to six hours of plant running time per day.

Renco Mine was also affected by erratic power supplies especially in the second quarter resulting in a 28 percent decline to 259kg from 360kg achieved in the same period last year.

As for the group's base metals business, Empress Nickel Refinery (ENR) remained under care and maintenance. The refinery processed rivets into matte during the period so as to generate revenue to meet care and maintenance costs as well as continue preserving the integrity of the plant.

The diamond business recorded improvements as Murowa Diamonds Limited achieved a 16 percent growth in production to 390 000 carats from 343 000 carats produced in the comparative period in 2018.

Resultantly, the share of profit from associates also grew to $12,8 million.

During the period under review, RioZim remained seized with legal battles relating to some of its chrome claims in the Darwendale area, and the matter is still within the courts.

The group remains committed to its plan of resumption of mining operations on its chrome claims after due consideration of chrome prices, once the legal matters are resolved.

The group is also still pursuing its power projects pipeline as it looks at enhancing energy supplies for its operations and the country as a whole.

Erratic power supplies remain one of the RioZim's major challenges and will have an impact on performance in the second half of the year.

Despite paying for electricity in foreign currency to have uninterrupted supplies, RioZim is still subjected to load shedding.

Mr Beebeejaun also highlighted that foreign currency remains a challenge to operations as RioZim's cost are now being converted back to US dollars which will put pressure on the bottom line.

"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 US dollars from shareholders, the company's position will continue to be extremely challenging," he said.

By close of Monday trade, RioZim shares were 2 percent down to $2,10.

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