eBusiness Weekly
Tawanda Musarurwa
Long-term optimistic prospects for the international gold price should have a positive impact on Zimbabwean gold producer, RioZim, analysts have said.
Gold has this year largely gained on the basis of being a safe-haven, as the global macro-economy has remained shaky.
And with some observers projecting that a number of the longer-term problems that have driven the gold bull-run will likely remain in 2020, especially the trade wars tensions between the United States and China, the gold producers will benefit from a high gold price in the short-to-medium term.
Says local research firm Morgan & Co in a recent note:
“Upside for gold miners has been supported by the ongoing US-China trade war that has taken the gold price on a bullish trend since 2016. RioZim is strategically placed as a major gold miner in Zimbabwe, and has invested in other minerals (nickel, diamonds, chrome) to reduce concentration risk in its topline,” said the analysts.
Analysts have projected that the price of gold will be range-bound between US$1430 to US$1 480 in the near-term.
And that it could even hit levels of US$1 530-40 per ounce over the next few months.
In respect of the performance of RioZim’s gold assets for the six months to June 30, 2019 gold output at its Dalny Mine was down 7 percent to 215 kilogrammes as power cuts persisted reducing production time to as little as four to six hours of plant running time per day.
On the other hand, Renco Mine was also affected by erratic power supplies especially in the second quarter resulting in a 28 percent decline to 259kg from 360kg achieved in the same period last year. However, gold output is expected to improve in the second half of the year. The analysts have, however, cautioned against RioZim’s other non-performing assets.
“However, one of its former major revenue drivers (Empress Nickel Mine) is under care and maintenance, while there are some legal hurdles around claims in its chrome business.
“Despite this, RioZim has taken measures to restore capacity utilisation at its mines by engaging in solar and thermal power projects in the country,” said Morgan & Co.
“We estimate a F2019F EPS of 62,82c, which implies a F2019F PER of 4.0x. RioZim looks undemanding when compared to local and regional peers (BNC, DRD Gold, Sibanye, Harmony Gold, Gold Fields) average PER of 11.7x.
“The gold rally is expected to be sustained beyond the medium-term and RioZim’s strategy of harnessing alternative energy will allow the miner to take advantage of the bullish trend on gold prices.”
