SOME 900 workers at Dalny mine near Kadoma have been sent home on unpaid leave after the gold producer was shut down with its Canada-based parent blaming the lack of progress in its indigenisation programme as well as power supply problems.
Toronto-listed New Dawn Mining also warned that it was uncertain about the continued viability of its other operations in the country which include Old Nic and Turk-Angelus mines in the Matabeleland regions as well as Camperdown and Golden Quarry mines in the Midlands.
The junior gold miner also owns 85 percent of Venice mine near Kadoma.
In a statement last Friday, the company said it was putting Dalny Mine on care and maintenance with the 900 staff sent home on unpaid leave, blaming a dip in gold prices, power supply problems with ZESA as well as the country's indigenisation programme.
The mine would remain under care and maintenance until the company manages to "satisfactorily address the financial and operational issues that contributed to its shutdown or until a potential sale, joint venture or some other arrangement is realised".
"The substantial fall in the price of gold over the last nine months, exacerbated by the impact of previously reported operational problems at the mine, has resulted in a serious liquidity problem," the company said.
"As a result, the amounts owing to the Zimbabwe Electricity Supply Authority (ZESA) in respect of the Dalny Mine operations were not being paid on a basis acceptable to ZESA, thus causing ZESA to issue a Notice of Disconnection of electrical services to the mine.
"Without electrical power, the Company cannot operate the mine and was thus forced to shut-down the Dalny Mine operations."
New Dawn said the mine's operational obligations, including the ZESA debt, had increased to US$3 million adding that a "steadily increasing payroll, high domestic royalties, taxes and other fees" had also worsened the situation.
The firm also blamed delays in reaching an agreement with the government over its indigenisation compliance plan for the problems at Dalny mine adding that uncertainty over the issue was also adversely impacting other group operations.
"A major underlying factor contributing to the Dalny Mine's current difficulties has been the more than two year delay in the still incomplete approval process for the Company's proposed Plan of Indigenisation." New Dawn said.
"A timely approval of the Plan of Indigenisation had been expected to provide the Company with access to sufficient investment capital to fully fund the development of a cost efficient operation at the Dalny Mine.
"After years of underdevelopment, had an investment program in the Dalny Mine been implemented and completed as originally anticipated, the Dalny Mine would have been positioned to maintain profitable operations in today's environment of lower gold prices and increasing costs."
The indigenisation programme requires foreign companies to transfer ownership and control of their Zimbabwe operations to locals and New Dawn says a revised compliance plan submitted in July 2012 is yet to be endorsed by the authorities.
The company's proposal contemplates investment by independent indigenous investor groups, together with the participation of the National Indigenisation and Economic Empowerment Fund (NIEEF).
Management said the second component of the plan provides for the transfer of equity interests in each of the company's local subsidiaries to community share ownership trusts and employee share ownership schemes.
However, delays in reaching an agreement over the deal as well as uncertainty over the programme after indications that its implementation would likely be stepped up following the July 31 elections meant there was no guarantee over the company's future in the country.
"The company's ... subsidiaries are facing negative working capital positions and an increasingly difficult legislative, regulatory and economic environment in Zimbabwe," New Dawn said.
"There is (also) heightened uncertainty surrounding the implementation of indigenisation policy subsequent to the July 31 elections, with the potential for an increasingly negative effect on the company and its stakeholders.
"The result of all of these adverse factors is that there is a significant and growing risk that actions more severe than steps taken so far or currently envisaged may be required, including the temporary or permanent closure of other of the company's mining operations in Zimbabwe and/or the sale or liquidation of the company and its assets in a formal or informal arrangement.
"Further, the company is currently unable to predict the effect of an inability to conclude or implement an acceptable Plan of Indigenisation. Such failure could result in the termination of the company's mining licenses in Zimbabwe, the loss of ownership and-or control of the company's assets and operations in (the country) without monetary compensation."