Rio Tinto laments fixed exchange rate

Gold mining group, Rio Tinto Zimbabwe, says the failure by the government to review the exchange rate of the Zimbabwe dollar on 1 June as had been promised by the Minister of Finance Herbert Murerwa in his Economic Recovery Plan in February, had resulted in a loss of confidence among the exporters.

It had also fuelled rapid rises in other exchange rates as exporters struggled to earn enough Zimbabwe dollars to cover their expenses.

In its report for the six months to June, Rio Zim says it is also worried, like other gold producers, that there could be delays in the payment of US dollars due to them.

At one time the delays had been as long as 60 days resulting in the company failing to pay some of its key suppliers such as the Zimbabwe Electricity Supply Authority.

Despite these problems, the company saw its net profit increasing from $45.7 million to $1.2 billion. It was the best performer on the Zimbabwe Stock Exchange for the nine months to September with its share price soaring more than 6000 percent. Last year’s net profit was $581.9 million.

Turnover shot up from $1.7 billion to $8.9 billion with operating profit at $1.7 billion, up from $123 million. Gold production was, however, down from 668kg to 424 kg.

The company says production at both Renco and Patchway was down because investment in the ore bodies was inadequate. Production at Renco has improved slightly from 6 115 ounces in the second quarter to 6 208 ounces in the third quarter.

Patchway was sold for $2.2 billion in July.

Nickel production was also down from 3 172 tonnes to 2 559 tonnes because the Empress Refinery had been shut down for four weeks following a disagreement with BCL of Botswana.

The company, however, says the situation should improve in the second half. Nickel produced increased from 1481 tonnes in the second quarter to 1 836 tonnes in the third quarter.

But the company adds that the difficulties being experienced in ensuring that supplies and services its operations require are available to them may impact on this optimism.

“The uncertainties arising from the present economic climate possibly outweigh the prospect of benefits that should be flowing from the relatively strong international prices of gold and nickel,” it says.

The company says it is winding down its exploration work with most of the fieldwork done.

It says the resettlement programme to make way for the Murowa diamond project took longer than expected, but the mine site should be available for the next phase in the third quarter.

(30 VIEWS)