MINING concern RioZim has defaulted on its debt repayment to banks as it is still awaiting shipping of metal from its nickel refinery- to international markets.
Well-placed sources said the group had communicated with the banks over the issue, indicating that payment depended upon sale of metal coming from the mining group’s Empress Nickel Refinery. The new metal sales follow the termination of the toll-refining agreement with Centametall, which was largely responsible for the losses the group had been having earlier. This had resulted in the postponement of RioZim’s annual general meeting following disagreements over financial statements relating to Centamettals. The RioZim group has since restated its financial accounts after reaching an agreement.
RioZim expects to be debt-free by next year, following initiatives it has taken since its rights issue in March. The company owed banks and suppliers more than US$60 million, but this has come down to around US$50 million.
The original principal debt to the banks was US$30 million and about US$25 million was owing to suppliers. The cost of funds ranged from between 12-126%, with the average at around 50%.
The group has repaid US$17 million of the original bank debt and is working on the refinancing of cheaper debt to get the average cost down to 12%. The debt is being serviced on a monthly basis.
The company held a rights issue and private placement in March which resulted in an immediate cash inflow of US$11,6 million, with the drawdown of convertible debentures providing the company access to a further US$45 million over a period of five years to address its future funding requirements.
Prior to this cash injection, RioZim had been struggling to meet its repayment obligations through a combination of expensive debt and operational underperformance. Lack of cashflow for working capital and critical capital expenditure exacerbated operational challenges.
The lenders to RioZim had made an application for judicial management, which was staved off by the capital raising.
While the new structure addressed the immediate cash concerns of RioZim, the group was also looking at raising a US$75 million syndicated loan through Afreximbank, which will refinance the existing debt and term out the repayment profile to suit the company’s cash requirements.
The plan is to use US$50 million of the new facility to refinance existing debt on considerably more favourable terms, and the balance to fund growth opportunities. An additional US$5 million from the facility will be used for immediate capital expenditure and working capital requirements.
The company will have access to the new debt facility as well as US$45 million of capital from the convertible debentures, which it will be able to use to pursue the longer term prospects — such as Cam & Motor, Sengwa and Murowa Diamonds.
The group, which is holding its annual general meeting today, is expecting to make an operating profit, but only reduce its loss position in the interim to June.
RioZim’s share price is one of the best performing counters on the Zimbabwe Stock Exchange, with a year-to-date gain of 43% on a price of 50 US cents. — Staff Writer.