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Harare Bureau
Falcon Gold says it has stopped all new project development due to the current lack of profits and the unviability of its mines in the current gold price and costs regime. This was after the group closed the September year end period with a $1,86 million loss attributed to the high cost regime of the gold mining sector, the closure of Dalny Mine and the weak gold prices prevailing on international markets.

According to chief executive Ian Saunders in the year-end results statement, the mining company hasn’t been able to raise new capital to boost capacity.

“As a result, the performance of the company in the period was largely dependent on external and uncontrollable factors such as gold prices, key input costs and taxes levied on the gold mining industry. These factors didn’t improve in the period,” said Saunders.

Gold sales for the year were down to 312kgs from 556kgs for the same period last year mainly due to the closure of Dalny Mine although the sole operating mine Golden Quarry increased to 312kgs.

The average gold price realised was $1,267 compared to $1,502 last year, a decrease of 15.6 percent. Analysts predict the same downward trend next year.

Saunders welcomed the reduction in the royalty rate to 5 percent effective October 1, 2014 although he said it had come at the most unfortunate time as the gold price fell to its lowest levels in the last four years. “Additional relief is needed to avoid widespread closures of gold mines in Zimbabwe. These initiatives include a further reduction in the royalty rate, a more competitive price for electricity and a reduction in refining costs being charged to producers.”

Mining and processing costs were at $11.79 million against $28,5 million last year reflecting the closure of Dalny Mine and other smaller incremental savings. However all group overhead costs as a percentage of mining and processing costs increased to 19.7 percent from 13.6 percent last year which included the 5 percent NEC mandated salary increase.

The company closed the year with negative cash flows of $700,143.

The company was also planning to do an upgrade at Golden Quarry Mine at a cost of $1.25 million designed to increase the output of the mine by up to 40 percent. “This will only be implemented if and when the required capital becomes available.”

Saunders said in the absence of new capital, the company would raise capital through the disposal of non-productive assets while it would continue to engage potential investors for possible joint ventures or partnerships to restart Dalny Mine.

Saunders said it would be difficult to continue operating and as such there was serious doubt about the company’s ability to survive under the current configuration.

“Accordingly the company may be forced to consider shutting down its remaining mining operation, either temporarily or permanently, and/or liquidating the company and its assets in a formal or informal arrangement”.