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The Zimbabwe Stock Exchange-listed multi-commodity mining firm would restructure to form and hold majority shareholding in Rio Gold, Rio Base Metals, Rio Diamonds, Rio Energy and Rio Chrome.
Rio would use the balance of 49 percent, the maximum foreign investors can hold under the Indigenisation and Economic Empowerment Act, to raise funding to support the initiatives. After restructuring, Rio Gold will comprise Cam & Motor, Renco, Kenilworth and Onestep, Rio Base Metals (ENR), Rio Energy (Sengwa Coal), Rio Chrome (RM Enterprises) and Rio Diamonds (Murowa).
The plan is part of RioZim’s targeted initiatives this year, including raising revenue by 157 percent to US$185 million to achieve a US$16 million profit target, a 251 percent increase. RioZim chief executive Mr Ashton Ndlovu confirmed the plans, but said three of the projects — Rio Gold, Rio Base Metals and Rio Energy — were on top of the group’s priority initiatives.
He said there were investors interested in particular projects under the group, who would only invest in a subsidiary and not at group level.
“Depending on capitalisation, the projects should start this year. We are at advanced stages in forming industry-focused companies. The firms have been registered and we are working on the legal and financial implications of implementing such a transaction.”
RioZim requires from US$50 million to US$100 million for Cam & Motor gold project, US$30 million to US$80 million for base metal projects and US$150 million to US$200 million for its 150MW power plant.
“There is an 18 to 36 months window (period) for completion of these projects,” Mr Ndlovu said.
But the group needs to manoeuvre around the issue of raising foreign funding without falling foul of breaching Government’s policy on local ownership.
The multi-commodity mining firm has also toyed with the idea of raising capital on local capital markets, but this does not appear attractive bait, considering the tight liquidity situation in Zimbabwe.
Mr Ndlovu said access to funding rests squarely with conclusion of the indigenisation status of RioZim which, according to the records, is owned 50 percent by a litany of indigenous institutions and individuals.
New investors Gem Raintree Investments Limited of Mauritius had pledged US$45 million in debenture funding, with options to convert this into shares. But if this happens the company could breach the country’s equity rules. The new investors also provided US$6,6 million after a private placement by the company to augment the US$5 million RioZim raised from a rights offer.
Mr Ndlovu said the fresh money was intended for new projects, not for retiring debt, as widely believed.
RioZim’s debts, which include US$60 million owed to banks and US$31 million for creditors, would be cleared using proceeds from current or expanded operations and new projects.
“We will fall foul of the legislation if foreign funding is put into RioZim under current arrangements,” Mr Ndlovu said, adding discussions had been initiated with Government on the terms under which RioZim can access foreign funding.
Earlier, GRIL had entertained partnering local firm Raintree Mining Company, but the intended marriage was aborted after it emerged the arrangement was not mandatory in terms of equity laws since the company is largely indigenous owned.
The firm, which 12 months ago teetered on the brink of liquidation, has made huge progress in turning around its fortunes in 2012 after seeing its revenue jump by 33 percent to US$72 million, EBITDA grew 317 percent to US$7 million while operating profit increased by 415 percent to US$5 million. Since then it has repaid US$17,8 million to retire a US$60 million capital debt to banks and US$11,8 million interest.
Online Reporter