- Output increased by six percent
- The first since 2019
- More about RioZim
Harare- RioZim Limited, a diversified mining firm with vested interests in gold, chrome and diamonds in Zimbabwe, has achieved a significant milestone by posting its first increase in gold output in over five half-year periods during the six months ended 30 June 2023. This positive development is attributed to the recent investments made in the BIOX plant and the 500 TPH plant.
The commissioning of the Biological Oxidation (BIOX) plant at the Cam and Motor gold mining operation in Kadoma, along with the establishment of the 500 TPH Plant, has had a significant impact on RioZim Limited's gold production. The BIOX plant, which was commissioned on 14 April 2022 at a cost of US$17 million, has played a pivotal role in reversing the downward trend in gold production that the company had experienced since 2019.
These plants have been instrumental in increasing the efficiency and effectiveness of gold extraction and processing . The BIOX plant, with its biological oxidation process, has enhanced the recovery rates of gold from the ore, resulting in improved overall production levels. The 500 TPH Plant, with its large processing capacity, has also contributed to the company's ability to handle a greater volume of material and increase gold output.
Since the reintroduction of the Zimbabwe dollar, gold output at RioZim has experienced a downward trajectory, deviating from the previous upward trend observed during the company's restructuring in 2012 and the introduction of the US dollar in 2009. The decline in gold production has been evident in consecutive years, with decreases of 8% in 2019, 39% in 2020, 4% in 2021, and 32% in 2022. These figures highlight the challenges and obstacles faced in maintaining and increasing its gold output in recent years.
During the reviewed period, RioZim Limited experienced a modest increase in production, with output rising by 6% to reach 417 kilograms compared to the 393 kilograms achieved in the corresponding half of the previous year. However, it is important to note that this performance falls significantly short of the record high achieved in 2018 when the company produced 1,050 kilograms of gold. This achievement in 2018 marked a significant milestone for RioZim, representing the highest half-year production in the company's history.
Despite the positive impact on gold production, RioZim Limited continues to face profitability challenges. The company attributes these difficulties to two main factors: electricity shortages and a foreign currency deficit. The ongoing electricity shortages in Zimbabwe have hampered the company's operations, leading to disruptions and lower productivity. Additionally, the foreign currency deficit has made it difficult for RioZim Limited to access the necessary resources and equipment needed for efficient and cost-effective mining operations like the Sengwa Solar Project which is yet to be started.
To address these challenges and sustain the benefits of increased gold output, it is crucial for the company to consider alternative energy sources. Investing in solar plants could provide a viable solution, as they would offer a more reliable and sustainable source of electricity compared to generators. While generators may consume a significant portion of revenues, they do not provide the continuous and consistent power supply required for efficient mining operations.
By channeling profits towards investing in solar plants, it can reduce its reliance on traditional energy sources and mitigate the impact of electricity shortages. Solar energy, being a renewable and environmentally friendly option, can also contribute to the company's sustainability goals. Reduced dependency on generators can result in cost savings in the long run, as solar energy can be harnessed free of charge once the initial infrastructure is in place.
It is important to note that investing in solar power is essential, considering the challenging operational environment for the mining sector. Electricity costs have surged by a staggering 40% in just 11 months, and currently account for 20% of mining firms' expenses. Therefore, integrating solar energy is a necessity for mining companies in order to mitigate the impact of escalating electricity costs.
Mines in Zimbabwe are currently grappling with a lack of immediate relief as the country's power utility, ZESA, has raised tariffs for miners to US12.21 cents per kilowatt-hour (kWh). This increase in tariffs comes as a result of the insufficiency of low tariffs in sustaining the power supply required by the mining sector. ZESA has expressed the need for higher tariffs to adequately maintain its infrastructure and address outstanding debts.
Further higher tariffs pose additional challenges for the mining industry, as it increases the cost of electricity, which is a critical input for mining operations. The mining sector heavily relies on a stable and affordable power supply to sustain its operations and ensure profitability. The tariff hike adds to the financial burden faced by mining companies in Zimbabwe, potentially impacting their competitiveness and overall profitability.
However, the management of RioZim has faced significant challenges in dealing with operational losses, particularly since the introduction of the US dollar. In fact, RioZim has experienced operational losses more frequently than other listed companies in Zimbabwe, such as Caledonia, Padenga, and the recently established Kuvimba entity. This suggests that there may be a management crisis within RioZim when it comes to effectively addressing and managing costs.
Therefore, implementing cost reduction strategies is crucial, particularly considering that mining companies are already burdened by substantial corporate taxes, surrender portions amounting to 25%, and high electricity bills. By addressing operating costs and implementing solar projects, RioZim has the potential to regain its position as one of the top gold-producing firms in Zimbabwe.
