ZMDC in massive capital deficit
THE Zimbabwe Mining Development Corporation (ZMDC), a government-owned mining investment company, had a working capital deficit of US$128 million on its books during the year to December 31, 2013, despite the flow of diamond revenue from Marange diamond fields, according to fresh official reports.
The situation casts doubt on the company’s going concern status, as well as how the company could have used millions of dollars earned from its shareholding in Marange diamond firms that churned out billions of dollars in the last five years.
ZMDC, which has interests in several mining houses with interest in copper, gold, asbestos, diamonds and other minerals, is one of the country’s largest, which has been instructed by government to revive several closed mines.
These include Mhangura Copper Mines, which was closed in the late 1990s, and Kamativi Mine, the tin producer near Hwange, where it has been scouting for investors to resuscitate production.
Kamativi was closed over a decade ago.
ZMDC has also been working towards resuscitating SMM Holdings, once the world’s sixth largest asbestos producer, where it had invested a cumulative US$17 million at the end of 2013, according to a report by the auditor general.
But amid a string of losses across its investments in Zimbabwe, the auditor general, in a report covering the full-year to December 31, 2014, which includes some accounts of parastatals for the year ended December 31, 2013, said the corporation’s working capital position was deteriorating, and there was material uncertainty in its ability to continue as a going concern.
“The group incurred a loss before tax of US$26 961 718 for the year ended 31 December 2013. (2012: profit of US$73 838 610) and its current liabilities exceeded its current assets,” said auditor-general, Mildred Chiri.
“These conditions along with other matters…indicate the existence of material uncertainty that may cast significant doubt about the ability of the group to continue as a going concern,” the report said.
It said Mbada Diamonds, one of ZMDC’s joint venture operations, posted a US$50 million loss during the period under review, after incurring a US$56 million profit during the full-year to December 31, 2012.
Commenting on Sabi Gold Mines, which is also a ZMDC unit, the report said: “Monthly production at Sabi Gold Mines for the year was consistently below budget resulting in adverse production variances. This was as a result of frequent breakdowns of critical mining equipment such as crushers.”
Among ZMDC’s interests are Shabanie and Mashava Mines in which it holds 76 percent shareholding, Todal Mining (40 percent), Gye Nyame (50 percent) and a range of other interests.
But mining firms have been affected by retreating mineral prices on the international markets, which has seen some firms reviewing their operations worldwide.