• Declining Production and Revenue: old production decreased by 27% to 306 kg, and revenue plummeted 13% to ZWL282.53 million
• Operational Inefficiencies: Equipment breakdowns, ore supply challenges, and lagging pit development have plagued
• Management and Governance Concerns: The persistence of these problems raises questions about management's ability to address operational inefficiencies

Harare – RioZim, once a leading gold producer, has reported disappointing financial results for the half-year ending June 2024, despite gold prices reaching record levels. The price of gold surged by $670.73 per ounce, a 32.52% increase since the start of 2024, breaking through the $2,200, $2,400, $2,600, and $2,700 marks, making it the top-performing metal this year.

The average gold price was $2,165 per ounce, 13% higher than the $1,910 per ounce recorded in the same period last year, a trend that RioZim, like other gold producers, should have capitalized on.

RioZim specializes mainly in gold but have interests also in diamond production, both of which are highly sought after as safe-haven assets amidst global geopolitical tensions. The company operates three mines: Renco Mine, Cam and Motor Mine, and Dalny Mine.

Despite favorable market conditions, RioZim's revenue for the half-year plummeted to ZWG 282.53 million, down from ZWG 352.41 million the previous year—a decline of 13%. In US dollar terms, using the June market exchange rate of 24 per dollar, this equates to just $846,250.

The company also reported a widened loss for the period of ZWG 165.71 million, compared to ZWG 11.05 million in the prior year. This paradoxically suggests that while gold prices were rising, the company's performance deteriorated.

Production Performance

During the reporting period, the group's gold production fell by 27% to 306 kg over six months. This is significantly lower than competitors such as Padenga, which produced 1,351 kg, and Caledonia, with 1,072.2 kg under similar operating conditions at national level.

At Renco Mine, the focus has been on refurbishing plant structures and addressing persistent equipment breakdowns impacting throughput. Renco's gold production decreased by 9% to 176 kg from 194 kg in the same period last year.

To address power supply challenges, the mine has implemented an alternative power arrangement, stabilizing operations.

“The mine will continue to focus on plant stabilization to ensure consistent throughput, cementing the 'high volume, low grade' strategy necessary for Renco to produce optimally,” stated the group's chairperson, Saleem Beebeejaun.

Conversely, Cam & Motor Mine's production fell by 42%, from 223 kg in the previous year to 130 kg this period, largely due to ore supply challenges. Lagging pit development has hindered the mine's ability to access certain areas. Accelerated development is required to meet the pit design and enable efficient mining operations.

Dalny Mine remains on care and maintenance, with no gold production during this period. However, it is advancing towards setting up small-scale operations after securing regulatory approvals, with production expected to commence in the latter half of the year.

Final Thoughts

Despite problems at national level such as electricity challenges, high taxes and high operating costs, and 25% export retention, RioZim is not operating in its own space hence, struggles to leverage rising gold prices are rooted in significant operational challenges.

Persistent equipment breakdowns, power supply issues, and inadequate ore supply have plagued its operations since 2020, leading to decreased production, reduced revenue, and escalating losses.

The ongoing nature of these issues raises concerns about management's ability to rectify operational inefficiencies. The repeated breakdowns and ore supply problems indicate a lack of effective maintenance strategies, insufficient investment in infrastructure, and poor planning.

Furthermore, delays in pit development and access to ore reserves reflect inadequate mine planning and execution. These persistent issues not only reduce production volumes but also adversely impact revenue, raising questions about management's effectiveness.

To reverse this trend, RioZim's management must conduct a comprehensive operational review, develop robust maintenance and repair strategies, invest in efficient technologies, and enhance mine planning and execution.

The company's inability to address these operational challenges has resulted in a decline in gold production from 586 kg in 2020 to just 306 kg currently. Revenue has similarly fallen from ZWG 352.41 million to ZWG 282.53 million, with a widening loss of ZWG 165.71 million, highlighting the urgent need to rethink strategies.

RioZim's failure to capitalize on rising gold prices represents a missed opportunity. With average gold prices at $2,165 per ounce, the company should be generating substantial revenue. Nonetheless, operational inefficiencies have thwarted this potential.

Despite these challenges, competitors like Freda Rebecca, Caledonia, and Padenga are performing well in the same environment. RioZim's poor performance has also affected its bid for a 178-megawatt solar plant, deterring investors who are wary of projects that might fail to yield returns.

Once among the top three gold producers, RioZim has since been surpassed by Padenga and is now the worst performer among listed companies. The decline in gold production since 2020 has been alarming, with 586 kg being the last time it outperformed Padenga.

Overall, the half-year performances have dwindled, now aligning with the quarterly outputs of other companies, necessitating urgent action from RioZim's management to restore its status in the industry.

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