RESOURCES group, RioZim said Tuesday it will likely report bigger losses for the full year to December citing lower gold production at its main Renco mine, weak mineral prices and poor matte supplies at its Empress Nickel Refinery.
The group posted an after tax loss of $7,4 million with revenue down 39 percent to $39,3 million for the six months to June, but said it expects to report an increased operating loss for the financial year ended December 31 when it reports results for the full year on March 27.
Its net financial position will be further worsened by finance charges incurred on the group’s exposure, it added.
“In the second half of the year, gold production at Renco mine decreased marginally by 0.5 percent though the annual production increased by 6 percent against 2013. The production was adversely affected by lower than anticipated tonnages and ore grade,” RioZim said in a trading update.
The company noted that last year, the average gold prices declined by more than 10 percent while production at Renco was hit by lower than anticipated tonnages and ore grade.
However, the move by government to reduce gold royalty levy from seven percent to five percent in October last year helped offset the effect of the poor prices.
Matte supply at Empress Nickel Refinery (ENR) was erratic and in short supply thereby seriously constraining the group’s performance for the second half of the year.
Only about 30 percent of the annual contractual matte supplies were being received, leaving the refinery operating at 25 percent of capacity.
“After declaring a series of force majeures (unforeseen, often natural occurrences) in the first six months of 2014, the sole supplier of matte went on a scheduled maintenance shutdown in the third quarter in an effort to address the challenges in the smelter section of their plant,” added the company.
“Even after maintenance shutdown, the challenges persisted to the fourth quarter resulting in only 30 percent of the annual contractual matte supplies being received and the Refinery operating at 25 percent capacity.”
RioZim said it is engaged in initiatives that will mitigate the concentration risk of dependence on one matte supplier but the engagements are only likely to start yielding results in the second half of this year.Advertisement
In addition to Renco mine, RioZim is also seeking to raise $10 million through a rights offer to reopen the Cam and Motoring gold mine near Kadoma, a cash cow until it was shut down nearly 50 years ago and key to the group’s revival.
It also holds 22 percent of Murowa Diamonds near Zvishavane, with the majority held by Rio Tinto plc. RioZim and Rio Tinto also jointly own the moribund Sengwa coal mine near Gokwe.