Rio blames exchange rates for its woes

Munyaradzi Wasosa

MINING concern Rio Tinto Zimbabwe Ltd (Rio Tinto) has blamed current distorted economic fundamentals, particularly the country’s exchange rates, for its unstable performance last year and h

as urged government to come up with a single exchange rate to ensure economic progress.


In a statement on the company’s annual general meeting on Wednesday last week, Rio Tinto chairman Eric Kahari said while the foreign currency auction system had improved export earnings, forex had remained in short supply.


“The auction system, coupled with various regulatory approaches, has been successful in eliminating the parallel market and has brought the country’s foreign exchange earnings back into an orderly system,” Kahari said.


“However, as the ongoing excess of demand over supply is testament to, the country remains short of foreign currency resulting in a steady weakening of the auction rate.”


He said because of financial constraints faced last year, the company failed to complete its capital projects.


“It is disappointing to report that the economic factors impinging on the company in 2003 once again led to a shortterm approach to the business,” Kahari said.


“I cannot recall a year when the company did not have capital projects outstanding at year-end, but that was the case in 2003.”


Kahari pointed out that the company’s mines countywide were hit by severe setbacks last year.


“Restoring development to optimum levels (at Renco Mine) has proved slower than had been hoped,” he said.


The conglomerate’s Empress refinery plant which was hit by an unusual windstorm in December last year, sustained considerable physical damage.


“The major impediment to restoring production (at the refinery) was the fact that almost ever power line in the Eiffel Flats area had been brought down,” Kahari said.


The company also owns Patchway and Cam Dam gold mines, which have been negatively affected by the continued slide in fortunes of Zimbabwe’s mining sector over the past few years.


Kahari dismissed reports that Rio Tinto was flouting the country’s mining laws by holding monopolistic exploration rights.


“RioZim is a company that intends to be active in exploration going forward,” Kahari said. “I would therefore like to dispel some of the misunderstandings that evidently exist about Zimbabwe’s exploration legislation.”


He said it was within the confines of the law to hold exclusive mineral rights in new territory.


“There is nothing sinister about a company holding exploration rights via the Exclusive Prospecting Order (EPO) system,” Kahari said.


An EPO entails the grants of exclusive exploration rights over significant areas.


To secure an EPO, a company applies to the Mining Affairs Board for the area it wishes to explore.


The company, through the EPO system, acquired diamond-rich Murowa Mine that is said to have at least 14,5 million diamond carat reserves.


The EPO is valid for six years at most, after which time other players can mine in the area.


Rio Tinto is engaged in a diamond joint venture with Australian-based mining giant Gravity Capital Ltd, and had four EPOs, which have since been revoked.