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Chairman Mr Tichaendepi Masaya said they would also be looking at short-term options of restructuring the company’s huge debt obligations.
Shareholders of the diversified resource firm approved the rights offer early last year but RioZim faced hurdles in securing an underwriter.
Essar, which recently bought a controlling stake in Ziscosteel, was also interested in RioZim but pulled out as the deal would have violated the country’s new empowerment laws, Mr Masaya told an annual general meeting.
“Foreign investors who had shown an appetite and capacity for the deal, withdrew recently due to the limitations on the equity stake imposed by the indigenisation and empowerment legislation,” he said.
“Regrettably, engaging with them, lost us seven months and at no time during that period was there any indication of an unsuccessful outcome.”
It is understood Essar pulled out as they felt they would be obliged to invest more in the company due to its huge cash requirements.
Market sources said RioZim required more than US$100 million to fund operations and meet debt obligations estimated at over US$50 million.
While working on the group’s rights offer options, RioZim was negotiating with banks and trying to improve efficiencies within the group. The company was also talking to banking institutions about restructuring its debt, from which they had received a positive response, managing director Mr Josh Sachikonye told the same meeting.
Asked if the Essar deal could be revisited, Mr Sachikonye said this was unlikely as the Indian firm disagreed with the 51 percent indigenous equity.
He added the group was no longer focusing on local underwriters, and RioZim had submitted plans once more to the Ministry of Youth, Indigenisation and Economic Empower-ment, after its submission last year received a negative response based on technicalities.
“We are convinced we are indigenous and that a foreign shareholder can come in up to a certain level,” said Mr Sachikonye.
“We should be able to achieve a reasonable dilution where we should still be able to consummate the rights issue. We are in the middle of
“In the meantime, we are going ahead with the internal solution as it is something we are completely in control of.”
Commenting on the operations Mr Masaya said the mining group was now producing acceptable top line profits, but excessive financing costs were weighing “heavily on our bottom-line performance”.
“We have paid over US$17 million in interest since dollarisation,” he said. “Until an acceptable resolution of the rights issue your company will continue to operate within the limitations imposed by the liquidity constraints and will be working to reduce the overall financing cost.”
Mr Masaya said the political climate had not made it possible for investment by foreigners and locals did not have the capacity to fund their aspirations.
“Until a comprehensive solution that addresses the wishes of both the indigenisation and empowerment legislation and foreign investors is found, meaningful investment inflows will continue to elude the economy, apart from special deals concluded outside of the prevailing legislation,” he said.
At an Extraordinary General Meeting last year, the group indicated that after raising cash the revenue should grow by 300 percent in the next three years.
Revenue would be increased by output from the revived Cam and Motor Gold Mine and Renco Mine. But this would depend on profitability and sensibility of prices on the international market. Cam and Motor, closed in late 60s, will be re-opened as open cast mine.
The gold mine was once Zimbabwe’s largest producer of the precious metal, doing underground mining then. After re-opening the mine, RioZim said it anticipated an annual production of 70 000 ounces.
Mr Masaya said RioZim had continued with exploration work on the Cam and Motor gold project and the Darwendale chrome claims. The inferred resource at Cam and Motor is now estimated at 720 000 ounces (vs 350 000 ounces last year), “thus translating this prospect into a project that could quickly be moved onto a development footing, when funds become available”.
“Exploration work on the Darwendale chrome claims has delineated an alluvial resource that can be exploited easily with minimal capital expenditure,” he said.
Sidumisile Mabena