BY FIDELITY MHLANGA
RioZim Limited, one of the biggest mining companies in Zimbabwe, says the outbreak of Covid-19 is putting a severe dent on its revenue base, which will be worsened by the central bank’s delays in remitting foreign currency receipts.
In a statement accompanying the company’s financial results for the year ended December 2019, RioZim chairman Saleem Rashid Beebeejaun said an assessment had been done on the potential impact of the pandemic and indications were that it would put a strain on the company’s finances.
Beebeejaun said the Reserve Bank of Zimbabwe (RBZ) foreign currency retention thresholds for gold exporters would exacerbate the crisis.
“The group’s cash flows will come under severe stress going forward. However, the impact in monetary value terms is undeterminable and remains unknown,” he said.
“Coupled with this is the fact that in addition to earning only 55% of our receipts in nostro (accounts), remittances of the company’s nostro receipts from RBZ are continuously delayed.
“We are constantly engaging the RBZ to ensure that payments are brought up-to-date, but this is another factor that may put pressure on our already strained cash flows.”
Beebeejaun said the foreign currency retention thresholds fell short of the company’s operational and capital expenditure requirements since it is required to pay for fuel and electricity in foreign currency.
RioZim also pays its employees partly in foreign currency.
Beebeejaun bemoaned the low interbank rates. He said the huge premium between the interbank market and alternative market rates had a huge knock on effect on the company’s margins
He said most of the company’s inputs were sourced using the prevailing alternative market rates.
Meanwhile, RioZim’s production declined by 7% to 1 658kg of gold against the prior year’s production of 1 792kg due to incessant power cuts of up to 18 hours per day, which hampered production at all of the group’s mines from Q2 2019.
“In addition to the power cuts, the group also suffered from breakdowns on the mills section at its Cam & Motor plant,” Beebeejaun said.
“Consequently, revenue for the year was subdued at $577.1 million”.
The price of gold was favourable throughout the period under review as it averaged US$1 395/oz, 12% higher than an average price of US$1 247/oz recorded in prior year.
The favourable prices partly cushioned the group’s reduced revenue due to lower production volumes.
Murowa Diamonds (Private) Limited recorded a 7% decline in production with 685 000 carats from 740 244 carats produced in the comparative period in 2018.
The low production was attributed to intermittent power supplies, which resulted in lost production.