RioZim Limited HY 2014 financial results

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RioZim Limited listed on the Zimbabwe Stock Exchange has released its half year results. Check out insights into this company in their presentation which appears below.
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RioZim Limited HY 2014 financial results

  1. 1. ($3.4m) $2.5m Operating (loss)/profit ($4.6m) $2.2m20132013 Revenue $39.4m $56.8m2013 Loss after tax $7.5m $2.3m2013 RioZim Limited Reviewed For the half year ended 30 June 2014 ABRIDGED GROUP RESULTS EBITDA (loss)/profit Introduction 2014 has been very challenging for the Group thus far. Performance was affected by events entirely beyond our control. Following the heavy rains in Masvingo and surrounding areas, sections of Renco mine were flooded in January and February affecting gold output. Furthermore, our sole supplier of matte for the Empress Nickel Refinery experienced severe problems with their smelter resulting in erratic and lower than forecast matte supplies. Matte supplies were approximatly 25% of our capacity. Economic Overview Liquidity challenges persisted in the first half of the year. Whilst efforts are being made to increase inflows to the fiscus, it is our hope that the measures are purely of a compliance nature as punitive measures would further harm an already crippled business environment. During the period the key commodity price indices remained broadly stable after being subdued in 2013. Nickel prices rose on average by 6.61% due to investors returning to base metals attracted by stronger global economic growth coupled by the drop in supply from the world’s number one producer, Indonesia. Copper prices on average fell by 7.26% due to low demand from the world’s traditional copper markets. Average gold prices in the first half were 15% below the same period last year. Financial Performance The lower production at ENR and Renco and effects of lower gold and copper prices compared to the prior year resulted in the Group’s turnover declining by 31% to $39.9 million from $56.8 million that was recorded in the same period last year. As a result, for the first time since the implementation of the Group’s turnaround in April 2012, the Group made an operating loss of $4.6 million (2013: operating profit of $2.2 million). Production at Renco mine was affected by the unusual storms which were experienced in and around the Masvingo area in the first quarter of the year. These storms resulted in a number of prolonged rain-induced power outages as well as flooding of some sections of the mine. The effects of these heavy rains were felt for a long time after the rains had ended as road and power infrastructure had to be repaired. Despite this, gold production increased by 19% to 324kg in the first half compared to 272kg in the last year’s comparative period. However, due to a 15% drop of average selling prices, the mine’s turnover only increased by 5% to $13.3 million from $12.6 million that was recorded in the same period last year. Production at Empress Nickel Refinery (ENR) was affected by the erratic matte supplies from the Refinery’s sole supplier. During the period, the supplierdeclaredmorethan9forcemajeuresduetothechallengesthatthey were facing with their smelter waste heat boiler. As a result ENR operated below capacity, receiving only 30% of the contractual matte quantities and operating at 25% of capacity. ENR’s contribution to the Group’s turnover declined from 78% in the same period last year to 66%. The net finance costs improved by 10% to $4.0 million following the restructuring of some facilities. The lower productivity levels in the first half of 2014 hampered the Group’s ability to service its debt at the planned rate. The Group continues to make strides in its plans to provide a lasting solution to all lenders and regular updates are being provided to the financial institutions. A share of profit from Murowa of $414 thousand (2012: loss of $635 thousand) was recorded. The share of profit was recorded on the back of improved throughput, processing of previously stockpiled material and improved quality of the gems. Outlook In an effort to permanently rectify the problem in their smelter, the ENR’s matte supplier embarked on a month long maintenance shutdown which commenced on 1 July 2014.The shutdown was completed on schedule and it is now expected that matte supplies will improve. Given the investments already made in improving efficiencies at ENR which include the recently installed oxygen plant, ENR is expected to have a better second half of 2014. Production is expected to commence shortly.That will give ENR four months to try and catch-up on the problem of the first eight months. Matte supply remains the major risk at ENR. Management is focused on managing concentration risk of having a single supplier of matte by developing alternative supply lines of nickel and copper units from local basemetalsproducersandregionalonesaswell.Thiswillresultinanincrease in the beneficiation of minerals in the country and the region. The current ENR plant design capacity is to process 15 000 tonnes of low sulphur matte. A plant upgrade and uprate project is currently being evaluated, which will result in the plant being able to process 45 000 tonnes of high sulphur matte in the next 3 years. Renco’s future is dependent on redefining it to a high volume /low grade operation. To achieve this management is focused on implementing the upgrades to the crushing and milling circuits and also to increase plant capacity to process 1 800 tonnes per day from the current 912 tonnes per day. Further plans are in place to develop a new adit as well as sinking a new shaft in order to provide access to the current and future mining areas more cost effectively. The manufacture of the gold processing plant for the Cam and Motor mining operation is underway. The invitation to tender for the contract mining was advertised in the second quarter and the adjudication process is being currently finalised. Funding of the project is certain and delivery of the plant is still on track in the last quarter of the current year. Sustainability The RioZim Foundation is in collaboration with authorities to build Sengwa Magee Primary School. The Foundation has also embarked on an initiative with one of the embassies to promote education through the testing of Chairman’s Statement Consolidated statement of CHANGES IN EQUITY Attributable to equity holders’of the parent Available Non- Share Share for sale Other Retained Total controlling Total capital premium reserve reserve income shareholders interest equity equity US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000 As at 1 January 2013 659 11 600 123 133 10 897 23 412 (321 ) 23 091 Loss for the year - - - - ( 4 561 ) ( 4 561 ) (104 ) ( 4 665 ) Other comprehensive income (net of tax) 12 1 407 1 419 - 1 419 Balance 31 December 2013 (audited) 659 11 600 135 133 7 743 20 270 (425 ) 19 845 Loss for the period - - - - ( 7 434 ) ( 7 434 ) (42 ) (7 476 ) Other comprehensive income (net of tax) - - - - - - - - As at 30 June 2014 (reviewed) 659 11 600 135 133 309 12 836 (467 ) 12 369 30 June 2014 30 June 2013 Reviewed Reviewed Notes US$000 US$000 Revenue 39 383 56 809 Cost of sales (35 131 ) ( 44 797 ) Gross profit 4 252 12 012 Distribution and selling expenses (336 ) (155 ) Administrative expenses (8 649 ) ( 9 927) Other income 158 236 Operating profit (4 575 ) 2 166 Net finance cost (4 000 ) (4 426 ) Finance revenue 364 - Finance cost (4 364 ) (4 426 ) Share of profit/ (loss) of associate 414 (635 ) Loss before taxation (8 161 ) (2 895 ) Income tax credit 685 584 Loss for the year (7 476 ) (2 311 ) Other comprehensive income - - Total comprehensive loss attributable to: Equity holders of the parent (7 434 ) (2 280 ) Non-controlling interests (42 ) (31 ) (7 476 ) (2 311 ) Loss per share (cents) Basic 11 13.93 4.27 Diluted 11 13.73 4.21 30 June 2014 31 Dec 2013 Reviewed Audited Notes US$000 US$000 ASSETS Non current assets Property, plant and equipment 6 34 651 34 940 Exploration and development assets 8 14 625 14 238 Investment in associate companies 6 255 5 842 Available for sale investments 193 193 Deferred tax assets 6 085 5 804 Total non-current assets 61 809 61 017 Current assets Inventories 9 51 248 52 928 Trade and other receivables 5 100 3 910 Derivative financial assets 2 061 1 375 Cash and cash equivalents 539 669 Total current assets 58 948 58 882 Total assets 120 757 119 899 EQUITY LIABILITIES Shareholders’equity Share capital 659 659 Share premium 11 600 11 600 Available for sale reserve 135 135 Other reserves 133 133 Retained Earnings 309 7 743 Equity attributable to equity holders of the parent 12 836 20 270 Non-controlling interest (467) (425) Total equity 12 369 19 845 Non-current liabilities Interest bearing loans and borrowings 10.1 11 662 17 640 Provisions 154 154 Deferred tax liability 1 021 1 427 Employee benefit liability 230 230 Long term payable 4 611 4 611 Total non-current liabilities 17 678 24 062 Current liabilities Trade and other payables 5 52 353 44 861 Tax payable 282 282 Interest-bearing loans and borrowings 10.2 38 075 30 849 Total current liabilities 90 710 75 992 Total liabilities 108 388 100 054 Total equity and liabilities 120 757 119 899 Consolidated statement of Profit or Loss and Other Comprehensive Income For the six months ended 30 June 2014 Directors: E.N. Mushayakarara (Chairman), J.L Nixon (Deputy Chairman), A.S. Ndlovu (Chief Executive Officer)*, S. R. Beebeejaun, L. P Chihota, M.P. Mahlangu, K. Matsheza, A. F. Nhau, M. T. Sachak Executive Directors* Consolidated statement of financial position As at 30 June 2014 Consolidated statement of changes in equity For the six months ended 30 June 2014 new solar lamps in selected schools and communities. The Foundation will continue to position and brand itself as the agency of choice for collaboration with government, business, the diplomatic community, donors, educational institutions and NGO’s to bring sustainable development to communities across Zimbabwe. Following the flooding at Renco Mine the Group in partnership with the Ministry of Transport and Infrastructure Development and local authorities funded the repair of 70km of road in the Nyajena community. Directorate There are no changes to the directorate following the last reporting period. Appreciation I wish to thank management and staff who have remained unwavering in their support during this turbulent first half. I also wish to extend my gratitude to the rest of the Board for providing continued guidance. E N Mushayakarara Board Chairman Harare 21 August 2014 Visualcom/R03386
  2. 2. ($3.4m) $2.5m Operating (loss)/profit ($4.6m) $2.2m20132013 Revenue $39.4m $56.8m2013 Loss after tax $7.5m $2.3m2013 RioZim Limited Reviewed For the half year ended 30 June 2014 ABRIDGED GROUP RESULTS EBITDA (loss)/profit 6. Property, plant and equipment Land and Plant and Capital Furniture buildings machinery work in Motor and progress vehicles fittings Total US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$000 Cost At 1 January 2013 25 074 14 918 - 1 754 336 42 082 Additions - 279 1 558 320 105 2 262 Disposals - - - (74) (9) (84) At31December2013 25 074 15 197 1 558 2 000 432 44 260 Additions - 26 523 164 4 717 Transfers from WIP - 1 574 (1 574) - - - Disposals - - - (113) - (113) At 30 June 2014 25 074 16 797 507 2 050 436 44 864 Depreciation At 1 January 2013 542 5 025 - 1 666 283 7 516 Charge for the year 492 1 258 - 103 34 1 887 Disposal - - - (74) (9) (83) At31December2013 1 034 6 283 - 1 695 308 9 320 Charge for the year 247 628 - 74 17 966 Disposals - - - ( 71) - (71) At 30 June 2014 1 281 6 911 - 1 698 325 10 214 Net Book Value At 30 June 2014 23 793 9 887 507 352 111 34 651 At31December2013 24 040 8 914 1 558 304 124 34 940 7. Capital commitments 30 June 2014 30 June 2013 $’000 $’000 Contracts and orders placed 4 000 1 100 Authorised by directors but not contracted 7 129 9 071 Total 11 129 10 171 The capital expenditure is to be financed out of the Group’s own resources and borrowings where necessary. 8. Exploration, evaluation and development assets Exploration evaluation Development assets costs Total US$000 US$000 US$000 COST At 1 January 2013 6 411 7 129 13 540 Additions - 1 028 1 028 At 31 December 2013 6 411 8 157 14 568 Additions - 587 587 At 30 June 2014 6 411 8 744 15 155 AMORTISATION At 1 January 2013 - - - Armotisation - 330 330 At 31 December 2013 330 330 Armotisation - 200 200 At 30 June 2014 - 530 530 Carrying amount 30 June 2014 6 411 8 214 14 625 31 December 2013 6 411 7 827 14 238 Development costs are amortised when they have reached a point where the mine or operation is capable of being operated at commercial levels. 10.2 Current Interest bearing loans and borrowings Effective interest rate Maturity Date 30-Jun-14 31-Dec-13 Reviewed Audited $’000 $’000 Bank loans (facility limit US$8.6m) 21% Ondemand 6 686 6 808 Term loans (facility limit US$36.5m) 15% Onscheduleddates 27 744 20 455 Debentures (facility limit US$3.6m) 15% November 2014 1 545 1 591 Convertable debentures 13% August 2014 1 459 1 443 Long term loans (centametal AG) 13% December 2019 641 552 38 075 30 849 The group is currently putting together a shared security arrangement for all interest bearing loans and borrowings. Under this arrangement all interest bearing borrowings will have a first ranking charge over 100% of shareholding of the following RioZim Limited subsidiaries: • RioGold (Pvt) Limited • RioBaseMetals Limited • RioEnergy (Pvt) Limited • RioChrome Limited • RioDiamonds (Pvt) Limited 11.Loss per share Basic earnings per share Basic loss per share amounts are calculated by dividing the net loss for the year by the weighted average number of ordinary shares outstanding during the year excluding treasury shares. Diluted earnings per share Diluted earnings per share amounts are calculated by dividing the net loss attributable to the ordinary equity holders of the Group after adjusting for impact of dilutive instruments. The following reflects the income and share data used in the earnings per share computations: 30 June 30 June Reviewed Reviewed 2014 2013 $’000 $’000 Loss attributable to equity holders of the parent for basic earnings (7 434) (2 280) Net loss attributable to ordinary equity holders of the parent adjusted for the effect of dilution (7 434) (2 280) 30 June 30 June 2014 2013 000s 000s Weighted average number of ordinary shares 53 363 53 363 Adjusted for effect of treasury shares - - Weighted average number of ordinary shares for basic earnings 53 363 53 363 Convertible debentures 775 775 Weighted average number of ordinary shares adjusted for the effect of dilution 54 138 54 138 Loss per share (cents) Basic 13.93 4.27 Diluted 13.73 4.21 12. Dividends During the six months of 2014 no dividends were paid to equity shareholders. 13.Going Concern The Group recorded a net loss of $7.5m (2013-$2.3m) for the six months period ended 30 June 2014 and as at that date, its current liabilities exceeded current assets by $31.8m ( 31 December 2013- $17.1m). The loss was mainly incurred from the continued high finance costs and significantly less than budgeted performance at ENR which was a result of erratic matte supplies. The sole supplier of matte declared a series of force majeures during this period which events were outside the control of the group. These factors indicate the existence of a material uncertainty on the Group’s ability to continue as a going concern and therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business. Directors assess the ability of the Group to continue as a going concern on a continuous basis and believe that the going concern assumption used in the preparation of these interim financial statements is appropriate as they have considered the outlook and future opportunities and are satisfied that despite the adverse current performance, the Group’s turnaround is imminent. Key success factors revolve around: • Conclusion of the Group’s restructuring plans and capital raising initiatives which are at advanced stages. • Successful refinancing arrangements for the bank debts for which negotiations with stakeholders are progressing well. • Continued support from its shareholders. • Continued support from its main creditors including financial institutions. • Key creditors including financial institutions remain supportive through credit lines. • The Group remains with a viable project pipeline. • Normal operations at Renco Mine after effects of the flood were addressed. • Resumption of matte supplies at ENR which the supplier has committed to. • Successful commissioning of the Cam Motor project for which a deposit for the required machinery has been paid to the suppliers. The Directors therefore believe that the Group will continue to operate as a going concern and the preparation of these financial statements on a going concern basis is still appropriate. This basis assumes that the realisation of assets and settlement of liabilities will occur in the ordinary course of business. 14. Auditors’review and conclusion The Group’s external auditors, Ernst Young, have issued an unmodified review conclusion on the consolidated financial statements of the Group for the half year ended 30 June 2014.The review conclusion included an emphasis of matter paragraph drawing attention to the going concern uncertainties as disclosed in note 13 above. The review conclusion is available for inspection at the company’s registered office. Notes to the interim consolidated financial statements For the six months ended 30 June 2014 Directors: E.N. Mushayakarara (Chairman), J.L Nixon (Deputy Chairman), A.S. Ndlovu (Chief Executive Officer)*, S. R. Beebeejaun, L. P Chihota, M.P. Mahlangu, K. Matsheza, A. F. Nhau, M. T. Sachak Executive Directors* Consolidated Statement Of Cashflows For the six months ended 30 June 2014 1. General information The interim condensed consolidated financial statements of RioZim Limited and its subsidiaries (collectively, the Group) for the six months ended 30 June 2014 were authorised for issue in accordance with a resolution of the Directors on 21 August 2014. RioZim Limited (‘the Company’) and its subsidiaries (together ‘the Group’) are involved in mining and metallurgical operations in different locations in Zimbabwe. The Group has mining operations and a metallurgical plant. The Company is a limited liability company incorporated and domiciled in Zimbabwe. The address of its registered office is 1 Kenilworth Road, Newlands, Harare. 2. Basis of preparation The interim condensed consolidated financial statements for the six months ended 30 June 2014 have been prepared in accordance with IAS 34 Interim Financial Reporting. The financial statements are based on records that are maintained under the historical cost convention as modified by the measurement of available for sale financial assets at fair value. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s interim financial statements for the 6 months ended 30 June 2014. 3. Estimates When preparing the interim financial statements, management undertakes a number of judgments, estimates and assumptions about recognition and measurement of assets, results, liabilities, income and expenses. The actual results may differ from the judgments, estimates and assumptions made by management, and will seldom equal the estimated results. The judgments, estimates and assumptions applied in the interim financial statements, including the key sources of estimation uncertainty were the same as those applied in the Group’s last annual financial statements for the year ended 31 December 2013. 4. Significant accounting policies The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2013. The new standards that became effective for the year beginning 1 January 2014 are not going to have significant impact on the accounting policies of the Group. 9. Inventories 30 June 31 December 2014 2013 Reviewed Audited US$000 US$000 Stores and consumables 4 549 3 771 Metals and minerals in concentrates and circuit 45 758 45 165 Finished metals 941 3 992 51 248 52 928 5. Trade and other payables 30 June 31 December 2014 2013 Reviewed Audited US$000 US$000 Trade 39 435 33 597 Accruals 1 799 1 988 Statutory Liabilities 7 391 5 571 Other Payables 3 728 3 705 Total 52 353 44 861 30 June 2014 30 June 2013 Reviewed Reviewed US$000 US$000 Net cash flows generated from operating activities 3 833 8 541 Cashflows (used)/from investing activities Investment in exploration and evaluation assets (587 ) (22 ) Acquisition of property, plant and equipment (717 ) (156 ) Interest received from investing activities 1 - Net cash used in investing activities (1 302 ) (178 ) Cash flows (used)/from financing activities Inflows from borrowings 2 800 - Repayment of borrowings (1 443 ) (4 535 ) Interest paid (4 000 ) ( 3 589 ) Net cash used in financing activities (2 661 ) (8 124 ) Net (decrease)/increase in cash and cash equivalents (130 ) 239 Cash and cash equivalents at beginning of the period 669 1 034 Cash and cash equivalents at end of the period 539 1 273 REPRESENTED BY: Cash at bank and on hand 539 1 273 539 1 273 10. Interest bearing loans and borrowings Effective interest rate Maturity Date 30-Jun-14 31-Dec-13 $’000 $’000 10.1 Non- Current Interest bearing loans and borrowings Bank loans 15% September 2015 7 547 13 708 Long term loan (Centametal AG) 13% December 2019 4 115 3 932 11 662 17 640 Visualcom/R03386

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