Dalny weighs down Falgold

HARARE - Falcon Gold Zimbabwe Limited (Falgold) says its mothballed Dalny Mine (Dalny) weighed down profits for the half year to March 2014 due to revenue channelled to care and maintenance costs.

Although the Zimbabwe Stock Exchange-listed mining concern narrowed losses from $2,6 million incurred in the half year to March 2013 to $1,6 million during the period under review, it said Dalny’s maintenance costs contributed significantly to the negative position.

“The care and maintenance costs at Dalny for the six months ended March 31 2014 amounted to $774,475. This amount is included in the net loss reported,” Falgold said.

Dalny is 100 percent owned by Falgold and is set to be disposed to a United Kingdom-based African Consolidated Resources (ACR) for $8 million.

Falgold’s plan to dispose of Dalny — which has been facing operational challenges including, rising labour and power costs, high domestic royalties, taxes and fees, as well as a damaging and costly illegal strike by workers — has been on the cards since last year.

“The company is currently engaged in discussions with African Consolidated Resources to dispose of the assets and liabilities of Dalny,” said Falgold.

“ACR have offered a full payment price of $8 million. The estimated net cash from transaction is approximately $2,5 million,” the miner said.

Falgold said the transaction is subject to a due diligence and various actions which ACR is in the process of undertaking.

The terms of the disposal include full settlement of Dalny’s all-known trade creditors and payment of salary arrears.

ACR will also settle any capital gains tax or other liabilities due to the Zimbabwe Revenue Authority.

The balance of funds after the payments will be remitted to Falgold.

ACR is an AIM-listed junior resource development company focused on Zimbabwe, Zambia and Mozambique with projects covering gold, nickel, platinum, copper, phosphate and diamonds.

Falgold, owned by Canada-listed junior miner New Dawn, posted a $12,5 million loss in the year ended September 2013.

It produced 4,789 ounces of gold in the half year to March 2014, with an average sale price of $1,274 per ounce.

The output compared to 8,285 ounces of gold for the same period last year, which had an average sale price of $1,636 per ounce.

“The large drop in production in 2014 as compared to 2013 is attributable to the closure of Dalny,” said the miner.

Mining and processing costs decreased to $6,6 million resulting in a -5,8 percent operating margin as compared to $15,4 million recorded for the same period last year.

The plunge in mining and processing costs was attributed to the closure of Dalny and the implementation of cost control measures.

“The operating margin, although still negative, dropped significantly in 2014 compared to 2013 due to the closure of Dalny and cost wise initiatives necessitated by the large decline in gold prices win 2013,” said Falgold.

Administration costs fell by 18,2 percent.

The group said it is concerned with the weak world gold price which has fallen from a range of approximately $1,600 to $1,650 per ounce through March 31 2013, to a current range of around $1,250 to $1,300 per ounce.

“These levels with the current tax regime, rigid labour laws and the high power costs, operating profitability is non-existent,” Falgold said.

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