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Lower production at Empress Nickel and Renco Mines and the effects of depressed gold and copper prices resulted in turnover falling to $39,9 million from $56,8 million recorded in the same period last year

Tinashe Makichi Business Reporter
Diversified mining group, RioZim Limited’s revenue for the half year ended 2014 dropped 31 percent due to low production at its Empress Nickel and Renco Mines.
The lower production at Empress Nickel Refinery (ENR) and Renco and effects of lower gold and copper prices resulted in turnover going down to $39,9 million from $56,8 million recorded in the same period last year.
The group’s gross profit went down 65 percent to $4,2 million from $12 million recorded the same period last year.

For the first time since the implementation of the group’s turnaround strategy in April 2012, the group made an operating loss of $4,6 million compared to an operating profit of $2,2 million recorded in the comparative period last year.

Liquidity challenges persisted in the first half of the year and efforts have been made by the group to increase inflows to the fiscus.
During the period under review, the key commodity price indices remained broadly stable after being subdued in 2013.

Nickel prices rose an average by 6,61 percent due to investors returning to base metals attracted by stronger global economic growth coupled by the drop in supply from Indonesia.

Average gold prices in the first half were 15 percent below the same period last year while copper prices on average fell by 7,26 percent due to low demand from the world’s traditional copper markets .

RioZim board chairman Mr Elisha Mushayakarara in a statement accompanying the group’s financial results said production at Renco Mine was affected by the unusual storms which were experienced in an area around the Masvingo area in the first quarter of the year.

“These storms resulted in a number of prolonged induced power cuts on some sections of the mine.
“The effects of these heavy rains were felt for a long time after the rains had ended as road and power infrastructure had to be repaired,” said Mr Mushayakarara.

Despite those challenges, gold production for the group increased by 19 percent to 324kg in the first half compared to 272kg in the comparative period.
However due to a 15 percent drop of average selling prices, Renco Mine’s turnover only increased by 5 percent to $13,3 million from $12,6 million recorded in the same period last year.

Mr Mushayakarara said production at ENR was affected also by erratic matte supplies from the refinery’s sole supplier hence forcing the miner to operate below capacity receiving only 30 percent of the contractual matte quantities and operating at 25 percent capacity.

During the period, the matte supplier declared more than nine force majeure to the challenges that they were facing with their smelter waste heat boiler.
However ENR’s contribution to the group’s turnover declined to 66 percent from 78 percent recorded in the same period last year.

In an effort to permanently rectify the problem in their smelter, the ENR’s matte supplier embarked on a month -long maintenance shut down which commenced on July 1, this year.

The shutdown was completed on schedule and it is now expected that matte supplies will improve.
Given the investments already made in improving efficiencies at ENR, which include recently installed oxygen plant, the mine is expected to have a better second half of 2014.

Mr Mushayakarara said matte supply remains at risk at ENR and management is focused on managing concentration risk of having a single supplier of matte by developing alternative supply lines of nickel and copper units from local base metals producers and regional as well.

The current ENR’ plant design capacity is to process 15 000 tonnes of low sulphur matte and a plant upgrade and up-rate project is currently being evaluated which will result in the plant being able to process 45 000 tonnes of high sulphur matte in the next three years

Net finance costs for the group improved 10 percent to $4 million following the restructuring of some facilities.
He said low productivity levels in the first half of 2014 hampered the group’s ability to service its debt at the planned rate hence the group continues to make strides in its plans to provide a lasting solution to all lenders and regular updates are being provided to the financial institutions.

A share profit of $414 000 was recorded from Murowa against a loss of $635 recorded in 2012.
“The share of profit was recorded on the back of improved throughput, processing of previously stock piled material and improved quality of gems,” said Mr Mushayakarara.

He said manufacture of the gold processing plant for the Cam and Motor mining operation is underway.