RioZim Limited ( 2018 Annual Report

We have extracted below the Chairman’s Statement from the 2018 annual report of  RioZim Limited (, listed on the Zimbabwe Stock Exchange:

Notwithstanding the implementation of progressive policies aimed at opening up the Zimbabwean economy for both local and international investment, and a concerted effort to achieve the same by Government, the year 2018 proved to be an extremely challenging year economically characterised by acute foreign currency shortages and severe inflationary pressures. Specific to the mining industry, the stipulated foreign currency allocations persistently remained far below the stipulated retention levels which were set by the Central Bank from time to time. This set the stage for a very difficult operating environment and an inability to procure necessary stocks from critical foreign suppliers. That period is the subject of a legal dispute between the Group, Reserve Bank of Zimbabwe and Fidelity Printers and Refiners (Private) Limited.

The situation, however, worsened as the year progressed and reached unprecedented levels as was depicted by the involuntary shutdown of all mining operations by the Company’s gold business units in the fourth quarter. As a result of these challenges, a whole two months’ production was lost albeit the fact that the Company continued to meet all of its fixed costs and thus driving the business down a path of operating losses.

The resumption of operations was only made possible after an upward review of forex retention to 55%, and the release of payments towards suppliers. At the same time, although a forex retention of 55% was theoretically sufficient to meet the Company’s immediate operational expenditure needs and requirements, the remaining 45% of the Company’s gold export proceeds were paid in local RTGS currency at a rate of 1:1 with the US$, notwithstanding the fact that the prevailing parallel market was as at October trading at a rate of circa US$ 1: RTGS$4, and all local suppliers had adjusted their prices to these exorbitant parallel market rates. As a result, for a greater part of the second half of the year 2018, the Group effectively sold 45% of its gold production at only 25% of its true value.

Consequently, due to these macroeconomic factors and difficulties, gold production for the year regressed by 13% to 1.792 tonnes which is less than the 2.071 tonnes achieved in the prior year. Therefore, as a result of these challenges, the Group recorded a net loss of US$2.3 million for the year. Regrettably, this demonstrated a negative growth when compared to the net profit of US$8.1 million which the Group had posted in the prior year on the back of various growth strategies which it had implemented in the year 2017.

RioZim Limited, however, prides itself in being a truly resilient Zimbabwean company and despite these difficulties, various milestones were achieved during the course of the year, notwithstanding the macroeconomic obstacles which it faced. Firstly, the Group successfully moved from third-party contract mining and commissioned owner-mining at both its Cam & Motor and Dalny Mining sites thus not only significantly reducing operating costs but also, this made the Group’s mining operations wholly self dependant.

The Group was also able to successfully cold commission its flotation plant at Cam & Motor Mine which brought the mine one step closer to treating refractory ore in the area. Thirdly, the Group signed binding exclusivity and framework agreements with a renowned international player and investor in respect of its Sengwa Coal Mine resource which will see the commencement and ground-breaking ceremony of the Sengwa Power Station Project in the near future. Murowa Diamonds (Private) Limited, the Group’s associate, also managed to maintain its momentum from the prior year and produced 740 244 carats from 732 045 carats recorded in the prior year and thus reached record heights in its levels of production.


The Group’s revenue decreased by 15% to US$75.4 million in 2018 from US$88.9 million realised in 2017. The Group’s under performance was due to low production volumes in the second half of the year and the inability to complete planned capital projects due to foreign currency funding constraints, which would have sustained and increased production. Gold prices averaged US$1247/oz faring slightly better than the levels of US$1242/oz realised in 2017. From a purely operations perspective, the Group was  able to record an operating profit of US$2.4 million which was 71% below the prior year’s operating profit of US$8.1 million. Overall, however, the Group exited the year with a net loss of U S $ 2 . 3 million against a net profit  of US$8.1 million achieved in the prior year, partly attributable to the fixed costs incurred whilst operations were suspended for the gold business. In terms of EBITDA for the year, the Group realised a figure of US$4.5 million which again reflected a 66% decline from the prior year ’s EBITDA of US$13.4 million.

Functional Currency

The Reserve Bank of Zimbabwe introduced the RTGS$ as an official currency separate from the US$ on the 20th of February 2019. In terms of International Financial Reporting Standards (IFRS), this constituted a material post balance sheet event which reflected a condition that existed at the reporting date and therefore requiring adjustment in the financial statements. On 22 February 2019 the Government issued SI 33 of 2019 which prescribed an exchange rate of 1:1 for all assets and liabilities prior to or on the effective date between RTGS$ and the US$. IAS 21 “The Effects of Changes in Foreign Exchange Rates” requires that all transactions and balances denominated in a currency other than the functional currency should be presented at the market exchange rate.

The Group, however, in compliance with SI 33 of 2019 maintained the 1:1 fixed exchange rate between its functional currency US$ and RTGS$ as at the reporting date of 31 December 2018 in accordance with the law. This was however in conflict with IAS 21 which requires market exchange rates to be used. In this regard, the Group’s financial statements were therefore issued with an adverse opinion from its auditors as a result of the non-compliance with IAS 21.

Cam & Motor

The mine produced 458 kg in the first half of the year. However, due to falling recoveries and the temporary stoppage of operations, the mine closed the year with a total production figure of 758 kg which demonstrated a 22% reduction from the prior year. The decline in recoveries (65% in 2018 vs 77% in 2017) was attributable to depletion of amenable oxide ores and an increase in refractory ore, which cannot be effectively treated with the traditional carbon-in-leach process. Although the mine’s milling performance was an improvement from the prior year, this did not translate to improved production due to the falling recoveries and ultimately this resulted in an increase in the production cost per ounce. The Group is in the process of developing a Biological Oxidation (BIOX) Plant in order to treat there fractory ore reserves. Unfortunately, the scarcity of foreign currency held back the project in the year under review. Once operational, the BIOX Plant is expected to enable the Mine to double its production output.


The mine produced 591kg, 61% of which was produced in the first half of the year. The total period’s production was a 14% reduction from the prior year. The depressed output in the second half of the year was attributable to under-performance in the milling section. The deteriorating ability to access adequate foreign currency in the second half of the year hampered the Company’s efforts to procure consumables for the mine which resulted in low plant availability and reduced milling time. The situation was exacerbated by the impromptu suspension of operations in Q4. Furthermore, the mine was unable to proceed with plans to develop an additional shaft to ramp up mining capacity due to the same constraints.


Dalny produced 442kgs, an 8% increase from the prior year. The Company’s investment in exploration and development in the prior year resulted in the improved availability of ore sources with higher recoveries. Improved milling also underpinned the strong performance. Shortages of foreign currency resulted in the delay of scheduled underground mining at the mine which would have further increased production. As a result, the mine could not access the rich underground ore resource, leading to lower grades of 2.57 g/t against grades of 2.65 g/t achieved in 2017.

Empress Nickel Refinery

The Refinery remained under care and maintenance throughout the year. Murowa The Group’s associate Murowa Diamonds (Private) Limited (“Murowa”) posted a profit of US$6.8million. Murowa’s stellar performance was depicted in an increase of diamond production to 740 244 carats against prior year’s production of 732 045 carats. Furthermore, the courts’ declaration that the alleged ground rental fees were ultra vires the Mines and Minerals Act [Chapter 21:05] had a positive impact on the viability of theassociate’s business. The associate contributed positively to the Group’s results with a share of profit of US$1.5million (2017: US$1.4 million)


The Group made strides in the Sengwa Power Station Project which entails the development of a 2 800 MW power station in phases of 700 MW each. As the project gained significant traction during the year under review, the Company has now set ambitious targets for 2019 which will culminate in the project kick – off in the next twelve months.


Going forward, our objectives remain consistent and well defined; – pursue growth opportunities, generate free cash flows and positive returns. In this regard, the Group has lined up strategic initiatives which if successfully implemented, will significantly improve the Group`s fortunes. The major projects include the construction of the BIOX plant at Cam & Motor Mine and the Sengwa Power Station Project. The Group is encouraged by engagements made with monetary authorities to mitigate the currency constraints and is confident that the projects will prevail and is, therefore, looking forward to a conducive operating environment in 2019.


RioZim Limited remains resolute on building and maintaining a sustainable mining concern in line with its holistic approach to business. Among the Group’s key goals is to be a responsible corporate citizen.

RioZim Foundation continues to expand on its vision to create, develop and promote collaborative sustainable development programmes so that measurable socio-economic benefits are afforded to the communities in which the Group operates and to the country at large.


I would like to extend the Board’s sincerest gratitude to RioZim’s entire staff for their continued loyalty, support, hard work, and professionalism especially during the turbulent times which the business faced in the fourth quarter of 2018 which resulted in the involuntary shutdown of operations. I would also wish to thank our valued shareholders who continue to support the Group during the best and worst of its times.

Overall, despite the setbacks experienced in the year 2018, the RioZim Board, Management, Staff and myself look forward to delivering a year of real growth for the benefit of all our stakeholders which include our shareholders, communities and the nation at large.

Board Chairman