Exchange rate crisis weighs down RioZim
By Kudzai Kuwaza | NewsDay |
Production at listed multi-asset mining concern, RioZim, was affected by exchange rate distortions during the year ended December 31, 2021.
The firm said operations were affected by power outages across its mines, along with policy inconsistencies.
The firm reported a 7% decline in gold output, but revenue increased by 84% to $5,8 billion, chairperson Saleem Rashid Beebeejaun said in a commentary to the company’s financial statements.
RioZim reported $3,1 billion revenue during the same period in 2020.
The RioZim chairperson cited an unfavourable operating environment for the drop in output.
“The operating environment throughout the year was challenging,” he said.
“It was characterised by significant exchange rate distortions, ongoing power supply deficits and policy changes among other challenges, which negatively impacted the operations of the group,” the RioZim boss added.
He said the COVID-19 pandemic presented further challenges to a macroeconomic environment that was already volatile.
“The foreign currency retention was revised downwards to 60% in January 2021 from 70% in the prior year. This not only reduced the value realised for the group’s gold produce but also negatively impacted the timeous execution of the group’s projects, which predominantly required foreign currency,” he added.
Rashid Beebeejaun was referring to a foreign currency retention policy where exporters surrender part of their US dollar earnings in foreign currency, with the rest coming in Zimbabwe dollars at the prevailing exchange rate.
“This continued to put pressure on the group’s profitability as inputs tracked rates on the alternative market. The combination of a challenging operating environment and the delays to the completion of the BIOX plant project due to inadequate foreign currency resulted in the company incurring a loss for the year,” Beebeejaun said.
He said gold production, declined by 7% from 1 205kg produced in the prior year to 1 122kg.
He said due to delays in the completion of the BIOX plant project, the lifespan of the stopgap One-Step mining operation was extended and continued to supply ore to RioZim’s Cam & Motor plant.
Beebeejaun said production at Renco Mine, another RioZim asset, dropped by 3% because of reduced plant throughput as a result of increased power cuts.
Production at Dalny Mine improved by 6% as a result of increased plant throughput.
Gold production at its One-Step Mine fell by 18% from the prior year’s production of 427kg to 351kg as a result of lower grades.
The RioZim chairperson said there was no gold production from Cam & Motor Mine during the year as it continued with the construction of its BIOX plant project.
Diamond production at the group’s associate, RZM Murowa, declined by 28% to 414 000 carats, from 579 000 carats produced during the comparative period in 2020.
Beebeejaun said RioZim was engaging with potential financiers for its 178 megawatt solar plant project.
He added that discussions were progressing at a slower pace as a result of the complexities brought about by the COVID-19 pandemic.
On the 2 800 megawatt Sengwa Power Station, he said due to a mix of considerations brought about by the COVID-19 pandemic, the company had put up various financing options to attract potential investors to the project.