adminSenior Business Reporter
RIOZIM says it is likely to report bigger losses for the full year to December 2014 owing to lower gold production at its Renco Mine, weak mineral prices and poor matte supplies at its Empress Nickel Refinery.The group posted an after tax loss of $7.4 million with revenue down 39 percent to $39.3 million for the six months to June 2014, but envisages an increased operating loss for the financial year ended December 31, 2014 when it reports results for the full year next month.
In a trading update yesterday, the firm said: “In the second half of the year, gold production at Renco mine decreased marginally by 0.5 percent though the annual production increased by six percent against 2013. Production was adversely affected by lower than anticipated tonnages and ore grade.
“In addition, the mine’s performance was affected by the continued weakening of gold prices especially in the fourth quarter of the year.”
The mining firm, however, said from October 2014, the effect of declining gold prices was partially neutralised by a welcome reduction in the gold royalty levy from seven percent to five percent.
“Against this background, the group expects to report an increased operating loss for the financial year ended December 31, 2014 over the loss that was reported in June 2014,” it said.
RioZim said its net loss position would be further worsened by finance charges incurred on its exposure.
Last year average gold prices declined by more than 10 percent against the 2013 average prices.
Rio-Zim noted that base metal prices remained at subdued levels experienced in 2013.
“The matte supply at Empress Nickel Refinery continued to be erratic and in short supply thereby seriously constraining the group’s performance for the second half of the year . . . 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,” said the group.
It said the trend resulted in further losses being experienced in the second half of the year.
RioZim said it has engaged in initiatives that would mitigate the concentration risk of dependence on a single matte supplier but the engagements were likely to start yielding results in the second half of 2015.
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