Struggling RioZim seeks US$200m reboot capital
RioZim, a diversified resource firm listed on the Zimbabwe Stock Exchange (ZSE), requires an estimated US$200 million fresh capital injection to revitalise its struggling operations.
According to High Court papers filed by the employees to place RioZim under corporate rescue, the funds would be allocated to address the company’s escalating debts, facilitate the repair and maintenance of existing mining equipment and provide essential working capital.
RioZim mining assets include gold, chrome claims in Darwendale and Ngezi, a stake in Murowa Diamonds and coal claims in Gokwe where it wants to set up a power station and a base metals refinery.
While a shareholding restructuring is likely, according to court filings, selling the company in its current state is imprudent, with a strong emphasis placed on supporting initiatives that foster sustainable value for stakeholders while upholding broader social justice principles.
Represented by the Zimbabwe Diamond & Allied Minerals Workers Union and two employees from its subsidiaries, the workers contend that failure to implement the corporate rescue presents a serious risk for the company.
Corporate rescue is a process aimed at reviving financially distressed companies by providing a temporary moratorium on legal proceedings to allow for the development and implementation of a solvency plan.
“Even if the shareholding structure is reconfigured, it would not be prudent to dispose of the first respondent in its current form and substance,” read part of the court application, adding that failure to implement corporate rescue will inevitably lead to the undesirable liquidation.
“A compelling requirement exists to support efforts to create sustainable value for all stakeholders while embracing broader social justice. The revival of RioZim will significantly contribute to nation-building and help alleviate the consequences of paralysis.”
The workers argue that the group “possesses social and economic significance and relevance in Zimbabwe’s current and future landscape.”
“However, achieving optimal impact requires a system approach in how the group delivers its products and services, including addressing internal constraints.
“The governance reforms will create opportunities for the group to evolve, allowing change and stability to co-exist.”
The workers contend that reconfiguring the group for cost-effectiveness and improved efficiencies is achievable through current set-ups and potential enhancements, offering measurable benefits in cost, quality, and reliability.
The group’s turnaround could be realised through the participation of all stakeholders and effective communication to maintain relationships.
Court documents reveal that RioZim faces severe liquidity issues, with current liabilities exceeding current assets by approximately ZiG1,04 billion and total liabilities surpassing total assets by ZiG149,2 million as of June 30, 2024.
The company is struggling to meet financial obligations, including US$5,5 million and ZiG9 million in regulatory and contractual commitments, prompting the Zimbabwe Revenue Authority to suspect financial impropriety and demand its asset register.
Critical services like electricity have been cut off at the Renco Mine due to a US$4,7 million debt, and RioZim also owes US$5,6 million in outstanding salaries and faces numerous labour disputes.
Given the company’s negative equity of ZiG149,2 million and declining performance, including a drop in gold production despite global price increases, the situation is unsustainable and necessitates intervention to prevent collapse.
Furthermore, RioZim faces significant legal challenges, including criminal charges from the tax authority and the Mining Industry Pension Fund, a US$30 million commercial dispute, and a US$55 million debt to an associate company.
RioZim’s financial statements, audited by Forvis Mazars Zimbabwe, highlight a material uncertainty regarding the group’s ability to continue as a going concern, a concern echoed by previous auditors, Ernst & Young Chartered Accountants, as far back as December 2021, who also noted significant compliance issues with International Financial Reporting Standards.
An independent technical report from May 2024 further underscores RioZim’s challenges, detailing the declining status of its mineral assets, with a significant portion of its gold and chrome mines (including Cam and Motor, Dalny Mine, One-Step, and Maranatha) currently under “care and maintenance.”
Only Renco Mine (gold) and Murowa Diamond remain operational, demonstrating the company’s financial instability and reinforcing the urgency of corporate rescue efforts.
The proposed turnaround strategy, according to court documents, focuses on achieving a shared vision among stakeholders through dialogue, reviewing operations for consolidation and control, establishing a clear communication framework, and redefining the company’s mandate and vision.
It is expected that this would lead to a refined organisational structure aligned with mining regulations and a strategic blueprint incorporating stakeholder needs for inclusivity. -herald
