The Zimbabwe Stock Exchange’s mining index has more than doubled this year, as punters bank on the bright outlook of Bindura and RioZim, who have both emerged from difficult times.
The resources index only has four counters, Hwange Colliery, Falgold, Bindura and RioZim with investor interest in the latter two driving the spectacular rise, analysts said.
Year-to-date, the mining index rose by 142.66 percent to 57.51 points, its highest level since January last year. On a quarterly basis, the index is up 116.12 percent.
The ZSE indices are the fastest growing in southern Africa this quarter, as local investors seek refuge in valuable stocks after the Zimbabwe government introduced local ‘bond notes,’ which President Robert Mugabe called a ‘surrogate’ of the US dollar, as the new currency.
Interest in Bindura and RioZim, however, appears to be driven by their improved performance and their positive outlook, analysts say while Falgold and Hwange remain mired in despair.
“The mining index is driven by fundamentals, for example Bindura and RioZim published very good sets of results which showed much improvement this year relative to the same period last year,” said an analyst with a local asset management company who requested anonymity as per industry standard.
“For RioZim the price of gold over the past year has been relatively high and this can be attributed to its improved performance in the previous period. Also, some of the RioZim debt was taken by (government’s bad debt asset manager, the Zimbabwe Asset Management Corporation), thereby enabling the company to get cheap sources of finance and expand its business at a lower cost,” the analyst added.
Zamco acquired RioZim short-term debt of nearly $34 million in January this year, a deal which cut the resource group’s finance costs by half.
In the half-year to June, RioZim narrowed its after-tax loss from $6.9 million last year to $403 000, with a 40 percent growth in revenue driven by an increase in gold production.
Revenue grew by nearly half, to $32.6 million from $23.1 million last year. Operating profit stood at $2.3 million from an operating loss of $2 million last year.
Gold production was up 76 percent to 775kg with production at the recently revived Cam and Motor mine at 405kg while Renco produced 370kg. Finance costs fell by 46 percent to $2.5 million compared to $4.7 million last year, and the company reported that it is current on all its obligations.
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