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RioZim courts suitors

The Zimbabwe Stock Exchange listed resources firm, RioZim, is courting regional and international investors to finance its proposed power station and coal mining project in Sengwa, the Financial Gazette’s Companies & Markets can report.

File picture of Rio Tinto operations in Zimbabwe
File picture of Rio Tinto operations in Zimbabwe

The company was granted a licence to construct the power station, which is expected to generate about 1 400 megawatts of electricity, more than a decade ago.
RioZim has, however, failed to secure funding for the project.

The company’s board chairman, Lovemore Chihota, confirmed that the company was in discussions with potential regional and international investors for funds. He, however, could not say how much was needed for the mine and the power station.

Chihota said: “Following the extensive explorative work conducted over the years at Sengwa Colliery providing a substantial resource of 1,3 billion tonnes of coal, investor appetite for the Sengwa power project has improved in light of the forecast power deficits within the region.

The bankability studies for both divisions of the project were updated, enabling the company to have meaningful discussions with potential regional and international partners.”

The development comes at a time when government has started monitoring developments at all licenced independent power producers (IPPs).

Government has licenced about 30 IPPs to construct power plants but most of them have failed to start due to lack of funding.

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This prompted government to start cancelling licences in January this year. The move started with the cancellation of Essar Holdings’ power generation licences.

RioZim, whose fortunes had tumbled over the years, resulting in banks jostling to recover debts to the company through the courts, appears to have turned around, with financial results for the year to December 31, 2017 indicating a profit since 2009 when the country dollarised to escape a hyperinflationary crisis.

During the period under review, the company reported a profit of US$2,5 million, from a US$8,8 million loss reported during the previous year.

Revenue grew by 15 percent to US$65,2 million during the period under review, from US$56,5 million the previous year. This was despite the fact that Empress Nickel Refinery remained under care and maintenance.

Chihota said the group benefited from relief provided by a debt restructuring carried out in 2016, which resulted in net finance costs decreasing by 20 percent to US$5,4 million, from US$6,7 million in 2015.

Last year, RioZim commissioned its Cam & Motor gold processing plant with full production set to commence this year.

Chihota said the company, however, continued to extract ore from the Cam & Motor mine and was processing it at a rented plant. Gold output from the mine almost doubled in 2016, increasing by 90 percent to 856 kilogrammes(kg), from 450 kg in 2015.

Renco Mine experienced a marginal four percent decrease in gold output to 712 kg during the period under review, from 749 kg recorded during the previous comparable period. This was attributed to subdued grades owing to the mine’s complex ore body.

The group’s associate, Murowa Diamonds, is recovering on the back of a number of initiatives implemented in 2016, including the roll out of a new mining plant and doubling the processing capacity.

Chihota said the move resulted in a sharp drop in RioZim’s share of loss for the year from US$2,2 million in 2015 to US$267 000 in 2016. Financial Gazette