adminoff its financial woes.
BancABC is leading the process of devising an appropriate way for RioZim to retire the US$53 million it owes a number of local banking institutions.
Sources said discussions were continuing and significant “traction had been achieved” for an all-inclusive solution to the RioZim debt crisis.
But holders of RioZim shares are worried the firm has little capacity to clear its huge debt and this was affecting the firm’s share price.
The Zimbabwe Stock Exchange-listed firm’s share price has plunged almost 50 percent from about US150 cents nine months ago. The share is currently trading at an average US70c.
This means investors who bought the share nine months back and held on to it up to now could have lost half the value of the amount the purchase price.
Share prices of performing gold mining firms should be rallying on bullish prices of gold on global markets that have risen to above US$1 900 per ounce in recent weeks.
“I do not think they have the capacity to repay the loans. The loans amount to US$53 million and its market capitalisation is just US$20 million. How do you think they are going to repay that money?” asked one investor.
In the full year to December 2010 RioZim paid a whopping US$10 million in interest and US$6 million in the half year to June 2011.
But RioZim chief executive Mr Josh Sachikonye issued a calming message saying his firm would conclude its debt restructuring exercise by end of this month.
“We are working towards finalisation (of the debt restructuring exercise). We should have a position by the end of this month,” said Mr Sachikonye.
He added that the recapitalisation of the firm was part of the debt strategy. BancABC is the lead advisor of the whole process for banks owed by RioZim.
Market sources said that RioZim required about US$100 million to retire the expensive debt and recapitalise operations.
Efforts to float a US$40 million rights issue collapsed after its underwriter, Essar Global, pulled out at the eleventh hour.
The firm was uncomfortable with a situation were it would be allowed to acquire less than 51 percent stake in the firm yet it would have to inject more capital, apart from its underwriting obligation, to bolster RioZim.
More funding will be required for exploration at RioZim’s Cam & Motor Mine in Kadoma, Darwendale Chrome deposits and nickeliferrous deposits at Chimakasa believed to host extensive reserves.
In the full year to December 2010 RioZim posted a US$2 million operating profit, but US$6,4 million finance costs saw the group posting a loss for the period of US$5 million from US$6 million last year.
Online Reporter