The Sunday Mail
LISTED miner RioZim Ltd has shed more than US$1,6 million in value as investors fret on Government’s intention to include its unit, Murowa Diamond Mine, in a new global diamond company.
Zvishavane-based Murowa Diamonds has been RioZim’s only profitable arm in the past two years.
In the half year to June 30, 2014, the gem producer’s net profit climbed to US$414 000.
Mines and Mining Development Minister Walter Chidhakwa told Parliament on March 12 that Murowa Diamonds, which is 78 percent owned by Rio Tinto Plc with the remainder controlled by RioZim Ltd, will be consolidated into a new national diamond company that will be 50 percent controlled by Government.
In the envisaged entity, seven diamond firms – Murowa, Anjin, Mbada Diamonds, DTZ Ozgeo, Diamond Mining Company, Kusena and Gye Nyame – will share 50 percent equity.
It is believed the new arrangement will help enhance accountability and transparency in the diamond mining sector.
Since Government’s announcement, shares of RioZim Ltd have plummeted 30 percent to USc7, the lowest in three years.
The company’s market capitalisation has consequently tumbled to US$3,7 million from US$5,3 million.
The stock has not traded since March 19.
In the past 52 weeks, RioZim stock has touched a high of USc26, but is down more than 53 percent since the beginning of 2015.
“It’s a combination of issues at work here,” cautioned Mr Albert Norumedzo, a Harare equity analyst, adding: “You cannot pin it on Government alone, although it has an effect.
“Being in partnership with Government, investors may not be sure of their future given the issues of efficiency. It is known the private sector performs better than public companies and parastatals. There is also no guarantee on the level of freedom of operation you (private business) will have.”
Mr Norumedzo said there “was no catalyst to whet investor appetite” in RioZim following revelations that the company is among the top debtors in AfrAsia and Tetrad.
RioZim Ltd, with interests in gold, diamonds, coal, nickel and copper smelting, has struggled to keep its business afloat as it has mainly been weighed down by a huge debt overhang, low metal prices and several operational challenges.
In the half-year to June 2014, the company reported that its losses widened to S$7,5 million loss from a loss of US$2,9 million a year earlier.
However, debts retreated 18 percent from a year ago to US$49 million.
In February RioZim warned that it is expecting significant losses for the full year ending 2014 as capacity utilisation at Empress Nickel Refinery had plunged 25 percent on low matte supply.
Production at Renco Gold Mine was also reportedly down 0,5 percent.
Currently, RioZim intends to restart operations at its Cam and Motor Mine in Kadoma, which was closed in 1968 after it became expensive to operate.
Shareholders last month approved a US$10 million rights issue that is meant to bring the mine back to life.
It is believed that Cam and Motor Mine has the capacity to produce 4 000 ounces per month.
Notwithstanding the current challenges that are affecting RioZim, analysts say there are general market-wide losses that are plagueing the bourse.
Global commodities prices continue to be softer than last year, a trend that negatively weighs on production, revenues and profitability.
