31 December 2012

Zimbabwe: Falcon Gold Fresh Capital Drive Stalled

FALCON Gold Zimbabwe says its ability to raise fresh capital for its expansion programmes will remain constrained until the indigenisation process is completed. The Zimbabwe Stock Exchange-listed company said in its full-year financial statement to September 30 2012 that it expected production growth to come from improved output and grades at Dalny Mine and additional capacity at Golden Quarry Mine.

"However, it should be noted that these projects require funding in an amount greater than is practical to provide from current operating cash flow," said Falcon.

"The company's access to such capital is expected to be constrained until the indigenisation process has been completed (then) appropriate capital can be obtained."

Falcon said the company, through its ultimate parent company, New Dawn Mining Corporation, was finalising its indigenisation plan which "the company's board of directors believes that (it) is compliant with the law, constructed and implemented in a manner that is equitable, socially viable and economically competitive".

The indigenisation law requires foreign-owned companies to sell at least 51 percent of their shareholding to black indigenous Zimbabweans.

In June last year, Falcon said it required as much as US$10 million to bring the company's assets to a "reasonable level of economic activity and to start exploration programmes on other prospective assets".

On the financials, the group recorded US$4 million net profit compared with US$1,8 million in nine months to September 30, 2011.

The company changed its financial year end from December 31 to September 30.

The increase in earnings was achieved on significantly higher revenues, which were up to US$34,6 million from US$11,5 million.

Operating costs rose to US$27,5 million from US$8,6 million on increased mining activities.

Operating margins declined to 20,4 percent in 2012 from 25,1 percent last year, primarily as a result of production inefficiencies at Dalny Mine.

Loans from shareholders increased marginally from about US$10,5 million to US$10,6 million.

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