- Company says low retention weighing on profitability
- Recently government revised retentions for small scale miners to 100%
Harare – Integrated mining and metallurgical company RioZim is bemoaning the upward revision of the gold foreign currency retention threshold which has resulted in the company’s inability to meet its operational expenditure requirements.
In a cautionary statement, the company said, “The Directors of RioZim Limited wish to advise the Company’s shareholders and the investing public that the Company is currently facing severe challenges arising from a major discrepancy between its expenses and receipts for its gold production.”
Fidelity Printers and Refiners (FDR) announced that gold producers shall be paid under a 70/30 payment arrangement scheme in which 70% of the gold sale proceeds are paid in foreign currency and the remaining 30% in local currency at the ruling exchange rate into the producer’s ZW$ account.
RioZim then said it is getting less than 80% for its gold production compared to the international market price since the interbank rate has been pegged at ZWL25: USD 1 while the real market purchasing power of the United States Dollar is allegedly hovering around 80:1 which effectively means that the company is selling 30% of its USD at a rate of 21:1 while the market and the company’s suppliers are pricing goods at in excess of 80:1.
Consequently, RioZim said it is no longer able to meet its operational expenditure requirements considering that the company is required to pay for electricity and fuel in USD along with almost all of its consumables and spares also being denominated in USD.
“This means that the Company does not have sufficient foreign currency to sustain its operations let alone fund growth. Employees are also refusing to be paid any ZWL and if paid in ZWL they are insisting that they are rated at the so called “market exchange rate”. The 30% local currency being availed at circa 75% discount to its real market worth, without overemphasising, is grossly inadequate to sustain operations.” said the company.
Furthermore, the company said the receipts for the gold delivered to Fidelity are being delayed inordinately and the company is currently owed USD2 460 472 and ZWL65 477 982 and the ZWL portion of the company’s receivables from RBZ have lost almost all their purchasing power in the meanwhile.
These delays, coupled with the current policies whereby the company is losing over 20% value of its gold, and the extremely expensive local market for its consumables and spares, has made it impossible for the Company to procure the necessary consumables required to continue production of bullion.
RioZim has, therefore, been forced to stop production of bullion due to its inability to buy essential consumables and spares and is actively considering placing all its gold mines on care and maintenance until a viable solution is found.
The company said it has engaged with the Government and other relevant authorities and continues to do so but has made no progress so far.
These developments and the consequences thereof will have a materially adverse impact on the Company’s performance, shareholders and the investing public are therefore advised to exercise caution and to consult their professional advisers when dealing in the Company’s securities until another announcement is made.
Currently, gold prices are at multi year highs as a result of investors moving towards safe haven assets and already Zimbabwe is producing less due to low retentions and other economic headwinds which, consequently, results in the country losing out on firm international gold prices.
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