HARARE – RioZim Limited says it is losing revenue to a “volatile operating environment”, with approximately 55% of its gross revenue spent on taxes and exchange rate anomalies.
In a trading update for the nine months ended 30 September 2021, company secretary, Tawanda Chiurayi said over 50% of the group’s revenue is lost to either the Reserve Bank of Zimbabwe or other Government agencies in the form of surrender of foreign exchange, royalties, taxes, duties and utilities.
Chiurayi said the Zimbabwe dollar the company received at the official exchange rate, had a purchasing power of almost half of what the company received.
“The ZWL received at the official exchange rate, had a purchasing power of almost half of what the company receives. That means that the company carries an additional cost of approximately 25% of revenue which comes from the current environment. In effect the company loses about 25% of its revenue altogether.”
In the period, the operating environment worsened in the third quarter with a marked weakening of the local currency as exchange rates skyrocketed in the alternative market. As a result, input prices tremendously increased as prices predominantly tracked rates in the parallel market.
“The group suffered considerable downtime, which negatively affected production and increased costs significantly due to power supply challenges that persisted during the period under review, resulting in severe load shedding across the country,” he said.
Chiurayi added that erratic power supply and other factors led to the group recording a 7% decline in gold production as compared to the same period prior year.
“The group currently produces at a loss due to the foreign exchange and power situation,” he said.
Cam & Motor Mine’s production declined by 31% from the comparable period, with the mine processing low grade ores from its One Step Mine during the quarter as the grade of the ores continued to be depressed below planned grades.
Production at Dalny mine increased by 31% during the period ended 30 September 2021. The growth in volumes was on the back of an increased output following plant process interventions that were implemented from the beginning of the current year.
Chiurayi said the mine also opened new open pit mining areas during the year which contributed to a positive upturn in ore availability and throughput.
Renco mine realised a 1% increase in production from the third quarter of last year. The consistent production was due to stable ore grades as the accelerated exploration activities which the mine undertook from the prior year continued to give it more control on its feed grades.
On the diamond business, Chiurayi said the Group’s associate RZM Murowa Private Limited recorded a 43% decrease in production compared to the third quarter of 2020.
“The low diamond production was as a result of processing low grade ores from the K1 pit after the high grade K2 pit reached pit life. The Associate’s Crown Jewel Project which will increase the processing capacity of the plant is progressing albeit at a slower pace than desired due to lack of adequate foreign currency,” he said.
The group is looking forward to commissioning the US$17 million Biological Oxidation (BIOX) Plant Project at the end of the fourth quarter this year. Structural steel fabrications and equipment installations progressed with most of the activities necessary to bring the plant to commissioning at an advanced stage.
The project will ensure that RioZim beneficiates its minerals by processing pure oxide ores to make good grades and high recoveries. This will in turn generate more foreign currency when exported.