RioZim Limited’s financial performance took a significant hit in the first half of 2024, with revenue declining by 20%, from ZWG 352.4 million during the same period in 2023 to ZWG 282.5 million, Mining Zimbabwe can report.
By Rudairo Mapuranga
According to RioZim’s reviewed interim financial results for the half year ended June 30, 2024, the drop is attributed to a combination of economic challenges, operational inefficiencies, and rising costs, all exacerbated by a volatile operating environment.
The Group’s financial results for the first six months highlight the primary causes behind this downturn, focusing on decreased gold production and increased expenses.
RioZim identified Zimbabwe’s economic instability as a major factor in its declining performance. The country has faced inflationary pressures, foreign currency shortages, and inconsistent power supplies, all of which have created a challenging operating environment for businesses, particularly in the mining sector.
In an effort to stabilize the economy, the Zimbabwean government introduced the ZiG currency (ZWG), backed by gold reserves, in April 2024.
This move, according to RioZim, has brought some price stability, but the company continues to struggle with foreign currency shortages and fluctuating exchange rates.
“In April 2024, the Government discontinued the use of the Zimbabwean Dollar (ZW$) and introduced the ZiG currency, which is backed by gold and cash reserves, as a mitigation measure against the continued depreciation of the Zimbabwean Dollar (ZW$),” the Group explained.
Despite this being a positive development, challenges around foreign currency availability persist, limiting RioZim’s ability to source necessary inputs and equipment.
One of RioZim’s most pressing operational challenges has been a 27% drop in gold production, with the Group producing only 306 kg of gold in the first half of 2024, compared to 417 kg during the same period in 2023.
The company stated that this decline has severely impacted its ability to generate revenue, despite favorable global gold prices, which averaged US$2,165 per ounce, a 13% increase compared to US$1,910 per ounce in the previous year.
RioZim noted that the lower production was mainly driven by suboptimal performance at the Cam & Motor and Renco mines. At Renco Mine, gold production decreased by 9%, falling from 194 kg to 176 kg due to persistent equipment breakdowns and inefficiencies in plant throughput.
The mine has implemented alternative power arrangements to counter inconsistent electricity supply, which has slightly improved operations. However, the Group acknowledged, “The mine will continue to focus on plant stabilization to ensure consistent throughput, which will support the ‘high volume, low grade’ strategy necessary for Renco to produce optimally.”
The situation at Cam & Motor Mine has been even more severe, with gold production dropping by a staggering 42%, from 223 kg to 130 kg. The mine’s inability to access certain areas of the pit due to lagging pit development has hampered ore supply to the plant, resulting in poor ore quality and low recovery rates. As a corrective measure, RioZim shifted from owner mining to contract mining after the reporting period, in an effort to accelerate pit development and stabilize production.
“This initiative is expected to improve ore supply within a shorter time, which will bring stability to production,” the Group highlighted.
The economic headwinds have also been compounded by rising operational costs. The Group’s cost of sales amounted to ZWG 278.6 million, down from ZWG 338.3 million in the same period in 2023. While this reduction aligns with lower production levels, it still underscores the high cost of inputs required to sustain operations.
Administrative expenses remained a burden, standing at ZWG 175 million, only marginally down from ZWG 179 million in the previous period.
The Group also recorded an operating loss of ZWG 159.4 million, an increase from ZWG 124.3 million in HY23, largely due to the lower gold production and high production costs. Additionally, RioZim incurred finance costs of ZWG 15.4 million, further impacting profitability.
RioZim is actively pursuing strategies to improve operational efficiency, reduce costs, and enhance financial performance. In its outlook, the Group emphasized that the focus for the remainder of the year will be on stabilizing production at its key mines and improving throughput, particularly through accelerated pit development at Cam & Motor.
“The improvement in pit accessibility will avail better quality ore to the plant, which will positively impact gold recoveries,” the Group stated.
In addition to optimizing gold production, RioZim is exploring opportunities to diversify its revenue streams and reduce its reliance on gold. The Group is currently involved in the chrome and diamond sectors and has energy projects in the pipeline, including the 178 MW Solar Project and the Sengwa Project, which are now at the funding stage. The company continues to engage stakeholders in an effort to secure the necessary financing to move these projects forward.
However, the economic environment remains unpredictable. While the introduction of the ZiG currency has brought some stability, challenges around foreign currency availability, inflation, and rising costs persist. As the Group navigates these complex dynamics, it must carefully implement its strategic initiatives to ensure long-term sustainability.
