RioZim says its main shareholder is willing to convert loans worth US$11 million into additional shares in the gold miner, but number two shareholder Old Mutual has turned down a proposal to increase the company’s authorised share capital to allow the debt-for-equity transaction to go through.
The gold miner is desperate to raise forex to complete a new treatment plant at Cam & Motor, its largest operation. The BIOX plant is key to the Kadoma mine’s survival, RioZim said in its annual financial statements for 2019.
“The company embarked on various capital raising initiatives during the year to fund the completion of the BIOX Plant which holds the future of Cam & Motor Mine. Among these initiatives include approaching the Company’s bankers and other financial institutions and financiers both local and foreign for possible USD funding. Negotiations were at varying levels as at year end,” RioZim said, adding that these efforts had since been disrupted by the lockdowns in Zimbabwe and South Africa.
However, to raise capital from its main shareholder, Harpal Randhawa’s GEM RioZim Investments, RioZim would need to increase the authorised share capital. Old Mutual, the second largest shareholder with 23% of RioZim, opposes this plan.
“At the last Annual General Meeting, the company sought to increase its authorised share capital in order to raise capital in USD. This resolution was opposed by Old Mutual. Since then the company has been working with Old Mutual to find a solution that would allow the company to raise capital in USD but has not been able to arrive at any conclusion due to Old Mutual’s inability to raise USD to fund the capital project and its probable hesitance to be diluted,” RioZim said.
“Meanwhile, the Company’s principal shareholders and their affiliates have funded the Company to the extent of US$11 million in the form of foreign currency loans which they are willing to convert to equity and bring further capital but are constrained by unavailability of sufficient authorised share capital as mentioned above. We continue to seek engagement with Old Mutual while factoring in the effects of this delay on the company.”
This is not the first time that RioZim and Old Mutual have clashed over capital raising and strategy. In 2015, GEM RioZim Investments increased its shareholding after underwriting a $10 million rights issue, which was also targeted at raising cash for Cam & Motor. Old Mutual, at the time, had opposed Radhawa including US$2.87 million owed in management fees as part of his firm’s subscription to the rights offer.
In 2016, RioZim had to issue unsecured preference shares to ZAMCO, the special vehicle created to take over bad loans, in exchange for US$34 million in debts.
RioZim is spending US$17 million on the construction of the BIOX plant. The plant is needed to allow the mine to treat tough refractory ore. This needs special bacteria to release the gold locked in sulphides, a process called bacteria oxidation, or BIOX. Using BIOX technology would increase production by at least 50%, RioZim says.
“The BIOX plant was expected to be commissioned in the fourth quarter of 2020,” the company adds.
RioZim says gold output fell 7% to 1 658 kgs in 2019, hit mostly by power cuts and foreign currency shortages.
“The low production volumes were attributed to incessant power cuts of up to 18 hours per day, which hampered production at all of the Group’s mines from Q2 2019,” RioZim said.
The company says the 55% of its gold receipts that it receives in foreign currency is not enough to cover its capital and operational expenditure.
Renco Mine produced 556kgs of gold, 6% lower than in 2018. Dalny Mine, which was worst hit by power cuts, with blackouts lasting 18 hours per day, saw a sharp 18% drop in production to 364kgs from 442kgs. Cam & Motor Mine produced 738kgs, a 3% decline from 759kgs achieved in 2018.