Old Mutual comes to the rescue!

What a week last week was. I recall pointing out that the year 2012 was to be a year of corporate actions and my observation is proving to be correct. Last week alone we heard from Ariston, CFI and Rio Zim, Aico. They were all advising investors to exercise caution as they were engaged in one activity or two. The most significant of them all is the news that Rio Zim has secured $35m which will allow it to move foward if banks and creditors accept the proposal. I am personally pleased with the fact that one of the largest shareholders in the company Old Mutual has stepped foward to rescue its investment. (totally unrelated to this there was also news that Old Mutual will be issuing a special dividend to its shareholders of 1billion pounds, more on this when i find out more)

When the price of Rio was plummeting on the back of threats to place it under judicial management i was one of those who wondered why this should happen at all. After all Rio Zim is one of the largest listed mining companies in the country at least by assets. I said to myself if management could just sell its 19% in Murowa and wash its hands of Diamonds that surely could add a substantial amount of money that would see it pay off its shareholders and recapitalise its gold business. I guess i wasnt the only thinking this. A solution involving major shareholders is always the best approach to solving any problem within a company and i hope creditors and bankers respect and accept the proposed offer.

Clearly the benefits of having a functional Rio Zim far outweighs the short-term benefit of being paid back. If things return to normal at Rio Zim there will be more jobs created, more business for the current creditors and more deposits for the banks, we all know they need them.