FOR THE HALF YEAR ENDED 30 JUNE 2022
The COVID-19 pandemic receded from the beginning of the year and as a result various economic activities which had been furloughed since the onset of the pandemic slowly recommenced. This came as a positive development for the economy as stringent border controls, travel restrictions and other mandatory protocols were gradually relaxed facilitating smooth movement of people and cargo.
Despite the positive strides in the free flow of economic activities, the operating environment remained bedevilled with structural challenges throughout the period, most notably amongst them were acute power shortages, spiralling exchange rates, unreasonable pricing distortions and huge foreign currency inadequacies. Notwithstanding the various mitigating initiatives put in place by the Group to counteract these challenges, the impact of these factors had a significant negative effect on the operating and financial performance of the Group. Consequently, the Group recorded a net loss for the six-month period.
Gold production for the period declined by 30% to 393kg compared to 564kg achieved in the same period in the prior year. The subdued production was mainly attributable to the negligible production output at Dalny during the period coupled with under capacity utilisation at Cam & Motor after discontinuance of the One Step operation to pave way for the resumption of mining activities at Cam & Motor. Gold prices firmed up by 3% during the period and averaged US$1 834/oz against an average price of US$1 777/oz recorded in the comparative period.
Revenue generated during the period was ZW$4.8 billion in comparison to ZW$2.6 billion recorded in the prior year. In spite of the reduction in gold production, revenue increased due to the steep depreciation of the local currency against the United States dollar as the average exchange rate moved from US$1:ZW$88 in the six-month period in the prior year to US$1:ZW$176 in the current period. However, this had a counter-balancing effect with costs rising disproportionately higher than revenue. The low gold production volumes coupled with the adverse effect of exchange rates distortions on costs, plunged the Group into a net loss of ZW$5.5 billion for the period under review.
The mine’s production for the period fell by 37% to 174kg from 278kg achieved in the same period in prior year. The low gold production was a result of low milled tonnage arising from severe power challenges during the first quarter and lost production due to a month long labour dispute in the second quarter. The labour dispute was amicably resolved and industrial relations at the mine are now stable after the engagements and interventions by management.
Dalny mine suffered from unsustainable low grades from its pits which resulted in the mine suspending operations for the six-month period under review. A marginal 8kg of gold was produced for the period against 105kg produced in the comparative period when the mine was fully operational. The mine’s underground shafts are currently flooded and will require an extensive dewatering exercise to bring them to mineable conditions. After careful consideration, the mine was put on full care and maintenance subsequent to period end and some small scale mining projects are being undertaken to sustain the care and maintenance costs.
Cam & Motor Mine
The primary focus at Cam & Motor during the period was the completion of the BIOX Plant Project and resumption of mining activities at the high grade Cam & Motor mine pits. Mining activities at One Step mine were therefore suspended from the beginning of year to pave way for a smooth transition back to mining and production from the Cam & Motor mine pits. Testing of the BIOX Plant and its separate components commenced in haste from the beginning of the year which brought the plant to completion at the end of the first quarter. Due to a mix of the discontinuance of One Step operations and testing of the BIOX Plant production for the period was depressed at 211kg even though this was a slight improvement from 181kg achieved in the comparative period.
BIOX Plant Project
The BIOX Plant was successfully completed and commissioned by His Excellency the President of The Republic of Zimbabwe Cde. E. D. Mnangagwa on the 14th of April 2022.
BASE METALS BUSINESS
The Empress Nickel Refinery continued under care and maintenance throughout the period.
The Company’s chrome claims in Darwendale remain under litigation pending finalisation in the courts.
The Group’s associate produced 115 000 carats for the period which was 52% below the 240 000 carats produced in the comparative period. During the period the mine stopped mining operations and migrated to processing its vast low grade stock piled dumps. This initiative resulted in low carats production for the period as the current plant has a limited plant processing capacity of 190tph.
The Crown Jewel Project which will increase the processing capacity on the current plant by circa three fold progressed well during the period and was brought to completion stage by period end. The Plant was commissioned subsequent to period end and production has since commenced from the new plant. Due to the low carats production the share of profit from the associate declined to ZW$83.8 million from ZW$252.9 million recorded in the comparative prior period.
178 MW Solar Project
The Company concluded all the regulatory requirements which are the prerequisites to the implementation of the solar projects across the Group’s mines. Negotiations on funding arrangements with potential funders of the project which had stalled in the prior year due to COVID-19 uncertainties were recommenced during the period as the pandemic declined at a global scale.
2 800 MW Sengwa Power Station
The Company is in discussions with various stakeholders including various arms of government on a potential mutually beneficial arrangement on the implementation of this multi-million dollar project. All our stakeholders will be kept abreast of all developments on an ongoing basis.
The Company is set to ramp up production on the BIOX plant in the second half of the year which will take the Group to stable production and return to profitability. However the operating environment remains uncertain due to a massive shortage of foreign currency, shortage of power and lack of availability of consumables in local currency. That notwithstanding, the Company remains optimistic of a positive turnaround on the operating environment through the strenuous efforts that the Government is making on many fronts.
The Group has spent over USD 110 million on the BIOX plant and the 500 tph diamond processing plant much of which was borrowed in USD and has to be repaid in the same currency. With a mandatory liquidation of 40% the amount of foreign exchange remaining with the Group has consistently proved insufficient to sustain costs. Production is erratic owing to the lack of foreign currency to buy consumables or carry out repair and maintenance and production plant. The Company has resorted to borrowing from the major shareholder again in foreign currency and contingent plans are being prepared for further borrowings in the short term as and when required.
Despite the relaxation of the COVID-19 protocols by the Ministry of Health and Child Care during the period, the Group remains vigilant and alert to any potential threats to our employees and the communities we operate in. The Company continues with its vaccination drive among its employees and within the communities which will contribute towards achieving herd immunity.
There were no changes to the Board of Directors during the period under review.
After careful consideration of the Group’s cash flow position there was no interim dividend declared during the period.
I would like to extend my sincere gratitude to my fellow Directors for their continued unrivalled commitment to the Company and their illustrious leadership in steering the Company during this immensely difficult period. I would also like to express my appreciation to our Management and Staff for their continued efforts and fortitude in the face of the adverse conditions that the Company is facing. I urge everyone to work together to the best of their abilities to turn the Company around.
S R BEEBEEJAUN
25 August 2022
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