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Business Reporter
An independent auditor’s report has issued a material uncertainty opinion over going concern status of the diversified miner RioZim, saying the firm’s accounts show that liabilities are greater than assets, meaning the company is technically insolvent.
Material uncertainty over going concern status is a serious issue raised by auditors in a company’s financial statements.
It indicates significant doubts by auditors about a company’s ability to continue operating in the foreseeable future, typically within a year.
This comes after auditors assess a company’s financial health and express an opinion on the fairness of its financial statements.
One key assumption they make relates to “going concern” status of the business- whether the company will be able to continue operating for the foreseeable future. If the auditor identifies significant factors that could threaten the company’s ability to keep operating, they flag a “material uncertainty” regarding going concern.
Several factors can trigger this concern, and these include negative net worth, when a company’s liabilities exceed its assets.
This scenario raises a red flag about its ability to meet financial obligations.
During the full year to December 31, 2023, RioZim incurred a net loss of $95,9 billion while total liabilities exceeded total assets by $5,8 billion.
“These conditions, along with other matters…indicate a material uncertainty exists, that may cast significant doubt on the group’s and company’s ability to continue as a going concern,” the auditor’s report said.
RioZim has interests in various mineral assets including gold, chrome and diamond.
Gold production for the year was 940 kilogrammes, which was a slight 1 percent increase from prior year production.
The subdued production volumes were due to persistent plant breakdowns largely experienced at Cam & Motor Mine in Kadoma, which struggled with breakdowns in its milling section resulting in reduced throughput.
Dalny Mine remained under full care and maintenance during the period.
The gold price maintained its growth trajectory from the beginning of the year and averaged US$1 913 per oz for the year, which was 8 percent increase from the prior year’s average price of US$1 766 per oz.
The improvement in gold production and gold prices increased the group’s revenue during the year to $216,1 billion compared to $20,6 billion achieved in the prior year.
The increase in exchange rates during the period contributed to a significant increase in revenue. Renco Mine reinforced its “low grade-high volume” strategy during the current year, ultimately maximising its milled throughput. This yielded positive results as production rose by 10 percent to 441kg from 402kg recorded in the comparative year.
RioZim is focused on stabilising power supply at Renco which remains a production obstacle for the mine.
To curb this problem, the mine continues to invest in additional generator capacity to limit the impact of power cuts on production.
Renco Mine is also reviewing its power supply arrangements and will consider all opportunities and alternatives possible that will result in improvement in power supply to the mine.
At Cam & Motor Mine, production was largely affected by continuous breakdowns on the milling section.
The mill 2 experienced frequent down times resulting in low milling throughput and was eventually suspended for major refurbishment in the fourth quarter and repair works were still ongoing as at year-end.
Consequently, gold production fell by 5 percent in the current period to 499kg compared to 527kg achieved in prior year.
While the mine is undergoing rehabilitation of its second mill to increase milling capacity, the mine was also focused on its pit development. Delayed pit development has affected the desired blending matrix of run of mine processed into the plant which had a significant negative impact on gold recoveries.
Dalny mine remained under care and maintenance yielding no gold production for the year. The mine is working on regulatory approvals for its envisaged small-scale operations in an effort to generate cash flows which will partially fund the care and maintenance costs and reduce the overall cash flow impact to the group. Base metals refinery remained under care and maintenance during the current year and contributed revenue of $314,2 million in the current period which partially funded its care and maintenance costs.
“The key focus in the ensuing year is to resuscitate the oxygen generation section of the plant which has a potential of generating additional income for the refinery,” said RioZim.
The legal dispute involving the company’s chrome claims in Darwendale persisted in the courts as at year end.
“The company is, however, committed to pursuing an amicable resolution of the matter with all the stakeholders concerned.”
Diamond production at RioZim’s associate Murowa, declined by 3 percent to 414 000 carats compared to 426 000 carats recorded in 2022. Mining activities from the pits remained suspended and material processed was obtained from the pre-mined low-grade tailings stockpiles. However, the achieved grades were reduced in the current year due to the inhomogeneity of the stockpiles resulting in lower carats being achieved.
RioZim said it recorded a share of loss from the associate of $5,4 billion in contrast to the share of profit of $102,1 million in the prior year due to the reduced carats in the current year.
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