RioZim stops operation due to harsh economic environment

HARARE, June 16 (Xinhua) -- RioZim, one of Zimbabwe's largest gold producers, has announced that it was stopping production at its gold mines and is considering placing them under care and maintenance because of a plethora of problems bedeviling the operating environment in the country.

The board of directors issued a cautionary warning to shareholders and investing public over its inability to continue producing bullion due to not being able to meet operating expenditure because of foreign currency constraints, among other factors.

The statement released on Tuesday said that the fixed exchange rate mechanism of 25 Zimbabwe dollars (ZWL) to 1 U.S. dollar, the limited foreign currency retention policy and delays in receipt of gold sale proceeds were impacting negatively on the company.

"The directors of RioZim Limited wish to advise the company's shareholders and the investing public that the company is currently facing severe challenges arising from a major discrepancy between its expenses and receipts for its gold production," it said.

"This is being driven by a combination of the fixed exchange rate mechanism and the limited retention of foreign currency being made available to it," it said.

According to a recent pronouncement by the Reserve Bank of Zimbabwe, gold producers are entitled to 70 percent of their proceeds in foreign currency and get the remainder at the prevailing fixed interbank exchange rate.

This is despite the fact that the real market purchasing power of the U.S. dollar is currently about 80 ZWL, RioZim argued.

"This effectively means that the company is selling 30 percent of its U.S. dollars at a rate of 25:1 while the market and the company's suppliers are pricing goods in excess of 80:1. This payment mechanism essentially means that the company is getting less than 80 percent for its gold production compared to the international market price," the company lamented.

It said the company is no longer able to meet its operational expenditure requirements considering that it is required to pay for electricity and fuel in foreign currency, along with almost all of its consumables and spares.

"Part of the salaries of employees are also paid in U.S. dollars, making it impossible to make ends meet. This means that the company does not have sufficient foreign currency to sustain its operations let alone fund growth," it said.

Employees are also refusing to be paid any ZWL and if paid in ZWL they are insisting that they are rated at the so-called 'market exchange rate', it said.

The company also lamented delays by RBZ's gold buying arm Fidelity Printers and Refiners in paying for the delivered gold.