RioZim says gold output for the half year to June fell 8%, as the company lost production time to power cuts and felt the impact of rising costs.
Local procurement costs have risen as market prices track the movement of the exchange rate on the parallel markets, adding to the impact of power cuts which worsened in the second quarter of the year, the miner said in a half year financial report released Tuesday.
“As a direct result of these power cuts, the group recorded a decrease in its production by 8% to 962kg from 1050kg achieved in the same comparative period in 2018,” RioZim said.
RioZim’s results were delayed due to changes to the reporting currency.
For RioZim, the currency changes introduced by the government since February, including the launch of the interbank market for forex, had its advantages. However, RioZim suggests the local unit has not been allowed to depreciate to its true value on the official market, eroding some of the gains.
“As far as the company is concerned, these policy changes enabled it to get slightly better realisation of the value of its export proceeds. The rate does not however adequately reflect the purchasing power of the Zimbabwe dollar and hence the company continues to receive less than fair value for its exports,” the company said.
RioZim on retention
RioZim, like other miners, want a removal of the retention scheme, under which they retain 55% of their earnings with the remainder sold on the interbank market. The company warns that retention could cause long term damage to its operations.
“Furthermore, the retention policy is placing enormous strain on the company’s access to foreign currency and is causing an increase in costs and also a delay in maintenance and expansion capital expenditure. The long term impact of this is not good.”
The company says it is now back to paying for almost all its inputs in US dollars, and is therefore “extremely short of USD”. This, RioZim complains, is impacting working capital, maintenance and capex for expansion.
“In the absence of either being allowed to retain and use 100% of its export proceeds or raise and use USD from shareholders, the company’s position will continue to be extremely challenging.”
Gold prices averaged US$1346 per ounce against US$1298 over the comparative period in 2018.
Cam & Motor, RioZim’s largest operation, produced 489kg, up 7% from the same period last year.
RioZim has cold-commissioned a flotation plant at Cam & Motor, which would allow it to treat refractory ore. This type of ore needs special bacteria to release the gold locked in sulphides, in a process called “biox”. Civil works have started for the biox plant and RioZim expects to commission it in the last quarter of 2020. However, the company needs forex to complete the plant.
“Assistance continues to be arranged by our principal shareholder but that is not sustainable. The plant is expected to commissioned by the last quarter of 2020,” says RioZim.
At Dalny Mine, the company could only run the plant for 4-6 hours per day as the power crisis peaked in June. This lost production time offset the benefits of new higher grade and higher recovery mining areas, resulting in output falling to 215kg, which is 7% lower than the same period last year.
Renco Mine suffered plant breakdowns and power cuts in the second quarter, cutting output to 259kg from last year’s 360kg. Murowa Diamonds, in which RioZim holds 22%, produced 16% more diamonds at 390,000 carats.
On power, the company has completed design work and grid assessment for a 178MW solar project to provide power to its mines. An investor has been identified for the 2800MW Sengwa coal project, which includes a coal mine, a power station, a water pipeline and transmission lines to the national grid.