CANADIAN-BASED gold miner New Dawn Mining Corporation says its Zimbabwean subsidiary, Falgold, has shut down its Dalny Mine in Kadoma after Zesa Holdings disconnected power supplies to the mine over debts. New Dawn wholly owns Dalny through Falgold in which it has a 84,7 percent equity. As a result of the closure, New Dawn said Dalny will be placed under care and maintenance while its 900 employees are being placed on unpaid leave.
According to New Dawn, the disconnection of electricity by Zesa followed Dalny's failure to pay its dues on a basis acceptable to the power utility due to serious liquidity problems arising from a substantial fall in the price of gold over the last nine months, exacerbated by the impact of operational problems.
"A combination of further adverse factors, all of which have been previously reported, also contributed to the decision to terminate mining operations at the Dalny Mine. These factors included steadily increasing payroll and power costs and high domestic royalties, taxes and fees, as well as a damaging and costly illegal strike and the lack of full electrical power, both experienced earlier in the year.
"In the aggregate, these specific difficulties, together with lower gold prices, caused significant operating inefficiencies and high operating costs, thus resulting in the operating losses and negative cash flows at the mine over the past several months," New Dawn said.
It added that 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.
"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 programme 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," it said.
Going forward, New Dawn said it intends to engage with the creditors of the Dalny Mine operations to craft a plan that will address the mine's outstanding trade payables, which is approximately US$3,1 million.
"The mine is expected to remain on care and maintenance until the company is able to satisfactorily address the financial and operational issues that contributed to its shut down or until a potential sale, joint venture or some other arrangement is realised," New Dawn said.
New Dawn recently indicated that it would offload its Zimbabwe operations if its cost cutting measure implemented early this year did not produce the desired results. This year was after it introduced a raft of measures among them the discontinuation of all capital development projects except those that were close to being commissioned to sustain operations for the next six months.
The Dalny Mine produced 1 949 ounces of gold in the quarter ended March 31, 2013, and 2 762 ounces of gold in the quarter ended June 30, 2013.
Turning to its other operations, New Dawn said all of its mining operations were under serious pressure to bring operating costs in line with the current gold price regime. Apart from Dalny Mine, New Dawn also owns Golden Quarry and Venice mines and a portfolio of prospective exploration acreage in Zimbabwe through Falcon Gold.
Its other interests include Turk and Angelus, Old Nic and Camperdown mines, which it owns 100 percent.