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Business Reporter
FALCON Gold has shut down its Dalny Mine in Chakari and sent 900 workers on unpaid leave after failing to pay creditors, including Zesa which issued a notice to disconnect power at the mine.Falcon Gold is 84,7 percent owned by Canadian miner New Dawn, which in a statement said the closure of the mine was due to a serious liquidity crisis caused by falling gold prices which resulted in the mine accruing debts of more than $3,1 million.
The mine produced 1 949 ounces of gold in the quarter ended 31 March 2013 and 2 762 ounces of gold in the quarter ended 30 June 2013.
It said other factors were affecting operations at Dalny Mine and these included a steadily rising payroll and power costs, high domestic royalties, taxes and fees, as well as a damaging and costly illegal strike embarked by workers early this 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.”
But it said the final straw was the notice from Zesa to disconnect power as the mine could not operate without electricity.
New Dawn said the mine would be placed under care and maintenance during the period of the shut down.
“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. As a result, the amounts owing to the Zimbabwe Electricity Supply Authority 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.
“As part of the shutdown, the Dalny Mine workforce is being placed on unpaid leave and the company is moving the Dalny Mine to care and maintenance,” said the statement.
It said New Dawn would engage with the mine’s creditors to craft a plan that will address the mine’s outstanding trade debts.
“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 shutdown or until a potential sale, joint venture or some other arrangement is realised,” it said.
Last month, New Dawn told shareholders that it was embarking on a raft of cost cutting measures at its Zimbabwean mines and those that failed to contain costs to remain viable would be shut down or disposed of.
New Dawn said delays in approving the company’s indigenisation plan were affecting plans to raise capital for Dalny Mine.
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