Indigenisation approval no respite: New Dawn

HARARE - Toronto-listed New Dawn Mining Corporation (New Dawn) says the approval of its indigenisation plan by Zimbabwe will not relieve the group of its liquidity and capital pressures.

The junior gold miner — which owns and operates several mines in three gold camps in the country  — said the endorsement of its empowerment deal last month will not underpin provision of capital required for its growth and development schemes.

Government finally approved the indigenisation plan after a two-and-a-half year delay, which saw the company shutting down its Dalny Mine due to uncertainty, among other challenges.

“Although the company received approval of its plan of Indigenisation… implementation of the plan will not alleviate the company’s liquidity issues or provide significant capital for any of the company’s mine development projects,” New Dawn said in its 2013 third quarter update.

It added that “provided there are no negative unforeseen or deleterious developments that materially impact the business environment in Zimbabwe and once implementation of the company’s plan is complete, a step that is likely to take some time, the company will be positioned to attempt to raise the additional investment capital it requires to move forward.” The Zimbabwe-focused group said some of its initiatives to address and improve operating viability at its mines were subject to various factors outside of its control.

“These include for example, taxes and royalties, mining fees, labour rates, power costs, environmental regulations, the economic and business environment in Zimbabwe, and potential changes to the legislative and regulatory environment in Zimbabwe, any of which could impact the company’s mining operations, capital requirements and ability to operate in a commercially viable manner or at all,” said the miner.

New Dawn’s indigenisation plan consists of two key components with the first one being the provision for the transfer of equity interests in each of the company’s operating subsidiaries in Zimbabwe, comprising five percent to the Employee Share Ownership Schemes (“ESOS”) and a non-dilutable ten percent to Community Share Ownership Trusts (“CSOT”). The second contemplates independent indigenous investor groups in
Zimbabwe acquiring equity interests in New Dawn, which would include the participation of the National Indigenisation and Economic Empowerment Fund (NIEEF), a sovereign investment fund controlled by the government.

Equity interests in the company’s subsidiaries to be transferred to the CSOT and ESOS for no cash consideration are expected to provide a direct and broad-based participation in New Dawn’s local mining operations for indigenous Zimbabweans.

This comes as in 2007 Zimbabwe crafted and passed as law the Indigenisation and Economic Empowerment Act that compels foreign-owned companies operating in the country to cede 51 percent shareholding to black locals.

New Dawn noted that since it is not anticipating that its Zimbabwean subsidiaries will be declaring dividends within the next few years, it has recommended a quarterly payment to the CSOT groups, calculated in the form of a 0.5 percent royalty on gold production.

“When dividends are declared in the future, any royalty payments paid within the preceding four quarters will be offset against the dividend entitlement.

“To take account of the 15 percent dilution of New Dawn’s interests in its Zimbabwe subsidiaries and to meet the additional effective 36 percent equity ownership of those subsidiaries by indigenous Zimbabweans through investment in New Dawn, the equity interest of New Dawn that will ultimately be acquired by independent indigenous investor groups (approximately 32 percent) and NIEEF (approximately ten percent) will, together, comprise approximately 42 percent,” said the miner.

New Dawn owns 100 percent of the Turk and Angelus, Old Nic and Camperdown mines whilst through its Falcon Gold Zimbabwe subsidiary it owns the closed Dalny, Golden Quarry and Venice mines, and a portfolio of prospective exploration acreage in Zimbabwe.

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