Zimbabwe: Warning of Mine Closures
TORONTO Stock Exchange-listed New Dawn says it might be forced to close its mining operations in Zimbabwe as a result of a fall in gold prices and its failure to obtain approval on an indigenisation plan.
The warning comes after the junior gold mining company, shut down Dalny Mine in Kadoma which employs 900 workers.
Besides Dalny, New Dawn runs Turk-Angelus Mine, Old Nic Mine, Camperdown Mine, Golden Quarry Mine and Venice Mine.
In a notice to stakeholders, New Dawn said the fall in gold prices resulted in serious liquidity challenges with the power utility threatening to switch off operations.
“… the risk exists that the company may have to take actions more severe than steps taken so far or currently envisaged, including the temporary or permanent closure of the company’s other mining operations,” New Dawn said.
“… the company is currently unable to predict the consequences of an ability to conclude or implement an acceptable plan of indigenisation with government authorities with which engagement will continue.”
The company said a major underlying factor contributing to the Dalny Mine’s current difficulties had 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,” New Dawn said.
“After years of underdevelopment, had an investment programme in the Dalny Mine been implemented and completed as originally anticipated, the mine would have been positioned to maintain profitable operations in today’s environment of lower gold prices and increasing costs.”
It said the Zimbabwean subsidiaries were facing negative working capital position and an increasingly difficult legislative, regulatory and economic environment in Zimbabwe.
New Dawn said there was heightened uncertainty surrounding the implementation of the indigenisation policy in Zimbabwe subsequent to the July 31 harmonised elections, with the potential for an increasingly negative effect on the company and its stakeholders. “The evolving policy on indigenisation now appears to be focussing on seizing 51% controlling interests in foreign controlled mines with compensation deemed to be the value of the minerals in the ground,” New Dawn said.
Under the empowerment legislation, at least 51% shareholding in businesses with a net asset value of US$500 000 or more should be in the hands of locals.