RioZim Limited has revealed that it is getting less than 80% of gold production due to a combination of a fixed exchange rate mechanism and the limited retention of foreign currency being made available.
This comes after the latest gold production framework which entitles gold producers to access only 70% of gold proceeds in foreign exchange in Nostro Account and the balance of 30% in Zimbabwean Dollars (‘ZWL’) at the prevailing fixed interbank rate.
“The interbank rate has been fixed at ZWL25: USD1 while the real market purchasing power of the United States Dollars (“USD”) is allegedly hovering around 80:1. This effectively means that the Company is selling 30% of its USD at a rate of 25:1 while the market and the Company’s suppliers are pricing goods at in excess of 80:1,” RioZim Management Services (Private) Limited (Secretaries), Per Chiurayi says in a cautionary statement.
“This payment mechanism essentially means that the Company is getting less than 80% for its gold production compared to the international market price.”
RioZim also says it is no longer able to meet its operational expenditure requirements considering that the company is required to pay for electricity and fuel in USD along with almost all of its consumables and spares also being denominated in USD.
“Part of the salaries of employees are also paid in USD making it impossible to make ends meet,” Chiurayi says.
“This means that the Company does not have sufficient foreign currency to sustain its operations let alone fund growth.’
“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”. The 30% local currency being availed at circa 75% discount to its real market worth, without overemphasising, is grossly inadequate to sustain operations,” Chiurayi went on.
RioZim management says the company engaged with the government and other relevant authorities and continues to do so but has made no progress.
“Further, even the receipts for the gold delivered to Fidelity Printers and Refiners are being delayed inordinately. Currently, the Company is owed USD 2,460,472 and ZWL 65,477,982. The ZWL portion of the Company’s receivables from RBZ have lost almost all their purchasing power in the meanwhile,” Chiurayi says.
“These delays, coupled with the current policies whereby the Company is losing over 20% value of its gold, and the extremely expensive local market for its consumables and spares, has made it impossible for the Company to procure the necessary consumables required to continue production of bullion due to its inability to buy essential consumables and spares and is actively considering placing all its gold mines on care and maintenance until a viable solution is found.”