Business / Companies
High finance changes weighed on RioZim's profitability
31 Aug 2011 at 09:12hrs | Views
RioZim's interim performance reflects the negative impact of the group's under capitalisation. Gold production increased marginally to 9,321oz, up 0.7% year on year while nickel production grew 20% to 4,119t.
Operating margins thickened to 6.9% from 1.5% the prior period benefiting from the firm gold price which averaged above $1,440/oz resulting in operating income increasing 381%. Nonetheless, the high finance charges of $6.5 million weighed on group profitability.
Production at Murowa Diamond increased 87% to 160,931 carats and diamond prices improved in the second quarter. The turnaround at Murowa will be reflected in its 2nd quarter sales. Operations at Empress have been scaled back following a force majeure declaration by BCL.
Limited cash flows led to limited exploration work. Limited drilling was undertaken at Cam and Motor with assay results having increased the extent of the resource. A resource of 5.0 million tonnes (724,491 oz of contained gold) at an average ore grade of 4.36g/t has been estimated at a depth of 200 metres. In addition limited under ground development at Renco earmarked at extending the life of the mine were undertaken and resulted in improved head grade.
RioZim's upside lies in its projects including Cam & Motor open pit, the diamond project (Murowa), the chrome project and the coal venture, with a possibility of a power plant on the Sengwa coalfields. The Sengwa coalfield has thermal fuel resources that can supply a power station producing of the order of 2,000 MW. Stable operating conditions at Renco can result in improved production to approximately 80kg per month, although with recapitalisation production can increase to 100kg per month.
The key issue relates to the successful conclusion of the capital raising initiatives. Working capital constraints and high finance charges continue to hamper group operations.
Operating margins thickened to 6.9% from 1.5% the prior period benefiting from the firm gold price which averaged above $1,440/oz resulting in operating income increasing 381%. Nonetheless, the high finance charges of $6.5 million weighed on group profitability.
Production at Murowa Diamond increased 87% to 160,931 carats and diamond prices improved in the second quarter. The turnaround at Murowa will be reflected in its 2nd quarter sales. Operations at Empress have been scaled back following a force majeure declaration by BCL.
Limited cash flows led to limited exploration work. Limited drilling was undertaken at Cam and Motor with assay results having increased the extent of the resource. A resource of 5.0 million tonnes (724,491 oz of contained gold) at an average ore grade of 4.36g/t has been estimated at a depth of 200 metres. In addition limited under ground development at Renco earmarked at extending the life of the mine were undertaken and resulted in improved head grade.
RioZim's upside lies in its projects including Cam & Motor open pit, the diamond project (Murowa), the chrome project and the coal venture, with a possibility of a power plant on the Sengwa coalfields. The Sengwa coalfield has thermal fuel resources that can supply a power station producing of the order of 2,000 MW. Stable operating conditions at Renco can result in improved production to approximately 80kg per month, although with recapitalisation production can increase to 100kg per month.
The key issue relates to the successful conclusion of the capital raising initiatives. Working capital constraints and high finance charges continue to hamper group operations.
Source - Imara Stockbrokers
