ROLLING power cuts, ravaging the economy, have haunted RioZim Limited despite the Zimbabwe Stock Exchange listed resources firm paying for uninterrupted power supplies in United States dollars.
The economy is experiencing loadshedding which lasts for about 18 hours due to low water levels at Kariba which has seen generation slumping to less than 200MW against a capacity of 1050MW and ageing equipment at the thermal power stations.
Early this year, ZESA Holdings entered into agreement with several mining firms to pay in the greenback. In turn, they would get uninterrupted electricity supplies. But, ZESA short-changed the miners as they continued to be cut off the grid.
RioZim board chairman, Saleem Rashid Beebeejaun, said the power cuts have severely affected gold production at its mines.
“Even though the company is paying for uninterrupted power supply in United States dollars, the group has continued to experience intermittent load shedding,” Beebeejaun said.
“The mine experienced acute power cuts in the second quarter of the year. This worsened during the month of June. Renco experienced some plant breakdowns which reduced production processing time. In addition, the incessant power cuts in the second quarter of 2019 had a negative impact on gold output. Power supply deficit remains a key risk in the second half of the year of 2019.”
To deal with the power crisis, RioZim is vigorously pursuing two power project, the 178 megawatts (MW) solar project and the 2 800MW Senga Power Station in Gokwe. Surplus would be exported to the national grid. Under the Senga project, RioZim wants to develop a coal mine, power station, water pipeline and power transmission lines to the national grid. The company said it has made significant progress toward the implementation of the project.
A feasibility study has been completed and a partner has been identified. For the solar project, an engineering procurement and construction partner has been secured and a memorandum of understanding has been concluded. The government’s retention policy has negatively impacted on the operations of RioZim Limited.
Government retains 55% of exports proceeds.
“The retention policy is placing enormous strain on the company’s access to foreign currency and is causing an increase in costs and also a delay in maintenance and expansion capital expenditure. The long term impact of this is not good,” Beebeejaun said.
“The company is now back to paying for almost everything in US dollars and is therefore extremely short of US dollars. This is impacting working capital, maintenance and expansion capital expenditure. In the absence of either being allowed to retain and use 100% of its export proceeds or raise and use US dollars from shareholders, the company’s position will continue to be extremely challenging.”
In its financials for the six months to June 30, 2019, published this week, revenues for RioZim grew 211% to ZWL$137m from ZWL$44m in the comparative prior year.
The low revenue, Beebeejaun said, was attributable to the decrease in gold production due to incessant power cuts experienced during the reviewed period.
Gold price, however, firmed during the period under review to US$1,344 per ounce on average compared to US$1,298 per ounce in the comparative period in prior year. Profit for the period was ZWL$38.2m compared to ZWL$406 000 in the same period in 2018.
Total assets for the group grew by more than 9 000% to ZWL$1.04 billion during the reviewed period from ZWL$162.1m in comparative period in prior year.