Falgold faces uncertain future

Falgold faces uncertain future
Published: 06 July 2017
ZIMBABWE Stock Exchange (ZSE) listed gold miner, Falcon Gold Zimbabwe, says the future of its remaining two mines in the country is uncertain due to a deteriorating economic environment, characterised by a liquidity crisis.

Falgold said its business had been affected by lack of access to cheap debt and a hostile tax regime.

The company sold Dalny Mine to RioZim last year in a $8 million deal.

The gold focused group, which operates Golden Quarry and Camperdown mines in Zimbabwe, said the hostile climate had resulted in its net loss for the half year to March 31, 2017, growing to $2,42 million, from $351,186 during the prior comparable period.

Revenues were undermined by low prices during most of the review period, although they had been crawling back in the past few months.

But president and chief executive officer, Ian Saunders, warned that income would be affected by the Dalny Mine disposal, as the Kadoma-based mine contributed to turnover through toll processing fees.

The group made an operating loss of $2,5 million during the review period, from a loss of $820 162 previously.

Falgold has accumulated losses of $12 million, resulting in a negative equity balance of $13,8 million as at March 31, 2017.

In contrast, overheads increased during the review period, as revenue declined by 11 percent to $3,66 million, from $4,1 million recorded in the comparable period the previous year on lower volumes.

Saunders said there were no prospects that the drawbacks would be addressed immediately as most of them were outside its control.

Falcon, one of only four resources counters listed on the ZSE, has shifted from long term planning to addressing difficulties as they arise.

"Due to the serious liquidity problems, the continued absence of significant investor appetite for Zimbabwe, and the lack of profits, management of the group is, of necessity, operating the group with a determined focus on addressing short term issues as they arise, but there can be no assurance that the group will be able to continue to conduct operations should existing circumstances persist and become exacerbated," Saunders said.

"The majority of factors affecting the group's operations are external factors outside of its control. As such there is significant pressure on the group's efforts to survive. Accordingly, and as stated previously, for any number or combination of reasons, should the group be forced to consider shutting down its remaining mining operations, either temporarily or permanently, and or liquidating the group and its assets in a formal or informal arrangement, then the group may be unable to continue realising the value from its assets and discharging its liabilities in the normal course of business," he added.

During the review period, gold production declined by 19,4 percent to 2 970 ounces, relative to 3 687 ounces produced during the same period the previous year.

Mining and processing costs increased to $5,6 million during the review period, from $5,42 million at the same time the previous year, with administration costs rising by 22,2 percent to $635 836 from $520 185.

"To increase the tonnage of higher grade ore from the mines, the long awaited project, the seven level loading station at Golden Quarry and the increased hoisting capacity at Camperdown, are finally scheduled to be commissioned during July 2017.

"Of the three mills (that Falgold operates), one is reasonably reliable, and several years of service are expected from it. The other two mills have serious equipment issues that are limiting their reliability and productivity. We are continuing to address the issues, although limitations on replacement parts have and are expected to continue to impact operations for at least the near term and possibly longer," said Saunders.

- fingaz
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