..as local bourse loses sparkle
Falcon Gold (Falgold) recently indicated its intentions to delist from the Zimbabwe Stock Exchange citing distressed operating and financial condition of the company as resources firms “flee” the local bourse.
The latest acquisition of Bindura Nickel Corporation, which is one of the remaining listed companies, by Sort International is also likely going to lead to another de-listing. Hwange Colliery Company Limited (HCCL) recently came out of administration and its shares have not been trading on ZSE since November 2018.
This is likely to leave Rio Zimbabwe as the only listed mining company that is trading. Analysts say while the market has been yearning for mining firms to list on the local bourse, ZSE does not have the capacity to provide large amounts of capital, especially the United States dollar which is the currency needed in the capitalintensive sector.
Investment analyst Ranga Makwata told Business Times that it was unfortunate that mining companies are delisting when more is needed on the bourse to offer some investment alternatives to investors.
“As for the mining stocks specifically, unfortunately, the resources companies listed on the ZSE do not represent the true state of the extractive sector in the country but are mostly remnants of yester-year companies,” Makwata said.
“They have largely failed to capture the interest of the investors because the operations for most of them have been struggling even at times when the sector was thriving.”
Mining as a sector since 2009 has been an area of interest generating most of the foreign currency for the country but activity happened far away from the local bourse particularly in the platinum sub-sector with mining giants like Zimplats and Unki.
As for the gold subsector, Makwata said the small scale and artisanal miners are producing more output than the country’s primary producers.
Experts attribute the low output by the primary producers to ongoing power outages, fuel shortages and unfavourable foreign exchange retention thresholds.
“Artisanal miners don’t pay much of the overheads a typical corporate incurs and some tend to smuggle the gold for better price than that paid by Fidelity Printers and Refiners (FPR).
“It’s unlikely that big mining businesses will see ZSE as a place for primary listing because the market doesn’t have the capacity to raise the right size of capital and in US$-but it certainly can offer good grounds for secondary listing,” Makwata said.
Another analyst Princess Mazumba further said, although the underlying markets for these companies’ commodities are quite different, the operating environment has posed a strain on many mining entities.
“The Reserve Bank of Zimbabwe retention policy for gold miners which entails miners to retain 55% of their foreign currency while the balance gets disposed at the interbank rate which is lagging behind on developments in the underlying economy where the exchange rate is much higher than that obtained on the informal market,” Mazumba said.
In addition, failure to use foreign currency reserves after 30 days has also led to automatic selling of these reserves at the interbank rate.
Such rigid policies which have somehow been volatile are likely going to restrict investments in the mining sector, analysts say.
Mazumba said miners are beset by constraints such as electricity and water shortages.
“This kind of background is therefore quite detrimental to the growth of this industry which is very crucial to attract investors and to generate the much needed foreign currency for the country,” he said.