Missing out on the gold rally

This week, one of the country’s primary gold producers, RioZim, released its results for the half year to June 30, 2020.

The ZSE listed entity said it had recorded low production volumes of gold at 586kg compared to the 962kg achieved in the comparative prior period. The low volumes were attributed mainly to “significant equipment challenges.”

For a company of its calibre, it is worrying that it talks of plant breakdowns at most of its mines. What could be the issues? How can they be resolved going forward? Losing 39 percent of production volumes, at a time the price of gold is up 27 percent is not good, not only for the company but the country as a whole.

Apart from plant breakdowns, RioZim bemoaned heavy losses it incurred “as a portion of the Group’s revenue was being received at an inferior fixed interbank exchange rate”. It also lamented erratic power supply which “posed a big threat to the Group’s operations as our mines experienced much lower than capacity running hours”.

We understand such challenges with regards currency policies, payment terms and erratic power supply affected or are still affecting the gold mining sector. A total of 13.4 tonnes of gold had been delivered to Fidelity by August, down from 17.84 tonnes same time last year and this was blamed on payment related issues.

The sooner such issues are resolved the better as Zimbabwe risk missing out on the current gold rally which is forecast to reach US$2,200 according to projections by American multinational investment bank, CitiGroup.-ebusinessweekly.co.zw