eBusiness Weekly
Tawanda Musarurwa
Listed mining group, RioZim Limited, took a 7 percent knock in gold output last year to 1 658kg from 1 792kg in 2018 as all its three gold mines recorded production declines due to power outages and a plant breakdown.
The depressed output had a knock-on effect on the group’s 2019 financials as total revenue for the period was lower.
RioZim’s gold mines include Cam & Motor Mine, Renco Mine and Dalny Mine.
Management — in the group’s 2019 financial report — attributed the poor performance to “incessant power cuts of up to 18 hours per day, which hampered production at all of the group’s mines from Q2 2019.”
Additionally, RioZim also suffered from breakdowns on the mills section at its Cam & Motor plant.
In respect of mine performance, Renco Mine produced 556kg of the precious mineral, which was a 6 percent decline in output from the comparative period production of 591kg.
The lower volumes at Renco were largely attributable to inconsistent power supply to the mine, which significantly reduced plant running time and throughput.
But Dalny Mine was the hardest hit by the power shortages, losing up to 18 hours per day from Q2 2019. Gold production at the mine regressed by 18 percent to 364kg from 442kg recorded in the same period in 2018.
On a more positive note, however, the group said the mine carried out vigorous exploration within the Dalny Mining Complex and successfully opened new mining pits with higher grades, which lessened the effect of low throughput due to power cuts.
The Cam & Motor Mine had the lowest percentage decline at 3 percent to 738kg from 759kg achieved in 2018.
The group attributed the mine’s low performance to persistent mill breakdowns during the year, which forced the Mine to carry out major overhaul repairs including reworking the foundations of the mills in the second half of the year.
“The Mine also exhausted its oxide ores at its pits during Q3 2019, which resulted in the shift of mining activities to the Group’s One Step Mine and hauling ore to the Cam & Motor plant, a distance of around 50km. Further, this was at lower grades which is characteristic of the ore composition at One Step Mine,” said RioZim chairman Rashid Beebeejaun.
As a result of the decreased gold output, RioZim’s total revenues for the period under review were subdued at $577,1 million.
However, the international price of gold was positive during 2019, which helped the group counter the effects of the volume decline.
“The gold price was favourable throughout the period and averaged US$1 395 per ounce (oz), 12 percent higher than an average price of US$1 247/oz recorded in prior year. This partly cushioned the group’s reduced revenue due to lower production volumes,” said the chairman.
“The group’s gross margin declined to 2 percent compared to 18 percent achieved in the prior year, which is reflective of the heavy premiums borne by the company as a result of the disparity between the local component of the group’s revenue, which is received at interbank rate against prices of local inputs which are pegged at alternative market rates.”
Meanwhile, gold output going forward can be expected to rise as the group last year re-embarked on the US$17 million capital project to construct the BIOX plant at Cam and Motor during, which had been earlier stalled due to lack of funds.
The use of the BIOX technology is expected to increase production by at least 50 percent.
“Civil works for the project have progressed to 30 percent as at reporting date. Structural steel fabrications are in progress after deposit payments were made during the year. Mechanical installations phase is scheduled to start during Q2 2020. The BIOX plant was expected to be commissioned in the fourth quarter of 2020,” said the Beebeejaun.
He however added that foreign currency shortages could delay the project.
The group had embarked on some capital raising initiatives during the year, but these have been stopped due to the emergence of the Covid-19 pandemic, which — management says — is also likely to have a significant negative impact on the company’s cash flows going forward.
