MARKETS: Rio Zim in profit warning

ZIMBABWE Stock Exchange- listed miner RioZim Limited (RioZim) has warned of an operating loss for the financial year ended December 31, 2014 on the back of an unfavourable business environment and declining gold prices.

In a statement today, the mining concern says the slowdown in macro-economic fundamentals, the tight liquidity constraints that prevailed in 2014 and subdued global prices of metals had a knock on effect on the group.

Gold production at the group’s Renco mine fell by 0,5 percent for the second half of 2014 from the same period a year earlier.

“Against this background the group expects to report an increased operating loss for the financial year ended 31 December 2014 over the loss that was reported in June 2014.

“The net loss position of the group will be further worsened by finance charges incurred on the Group’s exposure,” said RioZim.

However, annual production increased by 6 percent against prior year.

In 2014, average gold prices declined by 10 percent against the 2013 prices putting pressure on the group’s performance.

The impact of the falling gold prices were however weighed down by the reduction in gold levy royalty which was reduced from 7 percent to 5 percent in October.

In the second half of 2014 RioZim experienced shortages in matte supplies at its Empress Nickel Refinery (ENR), which negatively affected the group’s performance.

“After declaring a series of force majeures in the first six months of 2014, the sole supplier of matte went on a scheduled maintenance shutdown in the third quarter in an effort to address the challenges in the smelter section of their plant.

“Even after the maintenance shutdown, the challenges persisted to the fourth quarter resulting in only 30 percent of the annual contractual matte supplies being received and the Refinery operating at 25 percent capacity. This resulted in further losses being experienced in the second half of the year,” said RioZim.

Although arrangements have been made to avoid dependence on a single matte supplier, RiZim still maintains positive results will only be noticed in the second half of 2015.

 

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