After years of falling production, strikes and widening losses, RioZim has announced the inevitable – it is selling its mines to a new investor.
The company, once one of Zimbabwe’s biggest gold producers, has struggled with the result of underinvestment in its ageing mines, persistent equipment breakdowns, and a hostile foreign currency regime that squeezed what little came out of the company’s struggling plants.
Now, RioZim is in the final stages of discussions with new investors and lenders, paving the way for a change in ownership of operations that were once part of mining giant Rio Tinto.
“The company has been facing financial and operational challenges. Shareholders and the investing public are advised that the company is involved in the final stages of negotiations with a potential lender. The conclusion of the negotiations is imminent, which will resolve the company’s challenges,” RioZim said in a notice Thursday.
The company says it is close to a deal with a new investor. “The shareholders and investing public are further advised that the major shareholders have been in discussion with several interested parties and are now in the final stages of negotiating with an investor to purchase the majority shares in the company.”
The deal remains subject to due diligence, regulatory approvals, and the signing of sale and purchase agreements. Once completed, the new investor will make a mandatory offer to minority shareholders.
Losing shine
In the first half of 2024, RioZim’s gold production fell by 27%, continuing a years-long streak of declining output.
RioZim’s struggles have been long in the making. Its flagship gold mine, Renco, has been plagued by low ore grades, frequent breakdowns, and strikes. In Kadoma, the Cam & Motor mine and Empress Refinery have been in extended care and maintenance. Cam & Motor’s gold production fell 42% to just 130kg in the first half of last year—this despite a US$17 million investment in a BIOX plant meant to increase output by 50%.
Beyond gold, RioZim has stakes in Murowa Diamonds and a 50% share in Sengwa, a coal asset in Gokwe.
RioZim’s output of 900kg per year contrasts sharply with the rising fortunes of peers; Caledonia and Padenga’s Dallaglio now produce nearly three times RioZim’s output, and are ramping up production with new investments.
Strategy struggles
RioZim’s troubles have been years in the making.
In 2016, RioZim needed a government bailout. It offloaded US$34 million in bad debt to Zimbabwe’s Asset Management Corporation (ZAMCO), a government entity set up to absorb struggling companies’ liabilities. More recently, internal disputes over capital-raising strategies further paralysed the company. In 2020, its majority owner, GEM RioZim Investments, sought to convert US$11 million in shareholder loans into equity—a move opposed by Old Mutual, then its second-largest shareholder, over concerns about the dilution of other investors’ stakes.
In 2022, the Zimbabwe Diamond and Allied Minerals Workers’ Union (ZDAMWU) appealed to put RioZim under corporate rescue, after workers went for months without pay.
The passing of GEM RioZim’s owner, Indian billionaire Harpal Randhawa, in a tragic 2023 plane crash added further uncertainty to the company’s leadership and direction.
GEM RioZim was already looking elsewhere, announcing in 2022 that it was buying the Sperrgebiet Diamond Mine in Namibia “to diversify our assets and geographies”. – Source: NewZwire
