RioZim technically insolvent
Gold miner, RioZim Limited, is technically insolvent with a staggering negative working capital of about ZWL$1bn, creating uncertainty in its ability to continue as a going concern.
RioZim’s current assets stood at ZWL$2.8bn in the reviewed period compared to a current liabilities value of ZWL$3.8bn, meaning current liabilities exceeded current assets by ZWL$1bn.
The financial position effectively means RioZim could find it difficult to pay off its obligations as they fall due.
Its loss in the six months to June 30, 2021, widened to ZWL$1.5bn from ZWL$77.4m reported in the same period last year.
In its financial statements for the six months to June 30, 2021, published last week, the miner said its operations were significantly impacted by rain-induced power cuts and plant breakdowns in the first quarter.
“These factors ordinarily indicate the existence of a material uncertainty on the group’s ability to continue as a going concern and that it may be unable to realise its assets and discharge its liabilities in the normal course of business,” the miner said.
The company, however, said there were other factors which support the appropriateness of the going concern assumption in the preparation of the financial statements.
It said the group had secured funding to complete the BIOX project at Cam & Motor mine during the period.
It said installations of equipment and various components of the BIOX Plant were at an advanced stage at period end and continued subsequent to period end.
RioZim said commissioning of the Project is scheduled for Q4 2021.
Production is forecast to increase at Cam & Motor mine after commissioning of the BIOX Plant which will improve profitability and the working capital position of the group, it said.
“The group is in the process of installing generators at its mines to complement inadequate power supplies from the power utility. This will increase plant uptime and gold production,” it said.
RioZim said installations of an induction furnace which was purchased during the period at ENR were ongoing as at period end.
“The induction furnace will enable the Refinery to increase production through treatment of low-grade material from its dumps which will contribute positively to the working capital of the group,” it said.
RioZim chairperson Saleem Beebeejaun (pictured) said the promulgation of Statutory Instrument 127 of 2021 by the Government also added complexities on the pricing of local inputs, which despite the intended purpose, resulted in increased operational costs for businesses.
The overall effect of the Covid-19 pandemic and a difficult operating environment adversely impacted the operating results of the group for the half year period,” Beebeejaun said.
Production went down 4% to 0.56 tonnes in the reviewed period from 0.58 tonnes reported in prior year due to the rain-induced power outages and plant breakdowns experienced in the first quarter of 2021 which stifled plant throughput across the group’s mines.
Beebeejaun said: “Cam also experienced persistent rain induced breakdowns on the plant which also negatively affected plant throughput. Consequently, gold production for the period fell by 9% to 0.181 tonnes compared to the prior period’s 0.199 tonnes.”
Revenue for the group, however, grew to ZWL$2.6bn in comparison to ZWL$616.4m due to a direct result of the depreciation of the local currency against the United States dollar.