New Dawn might close?

By Daniel Chigundu

Mine workers face trouble times

TORONTO listed mining giant with subsidiaries in Zimbabwe, New Dawn Mining has indicated that it might consider shutting down if operating situation does not improve.

Mining is one of the few viable sectors that have been making significant contribution to the country’s coffers since dollarisation in 2009 and closure of New Dawn mines could pose some serious challenges for the new government.

In its quarterly review ended June 30, 2013 the company said its operations in the country are being weighed down by various issues chiefly the continuous falling of gold prices, regulatory framework and operational liquidity constraints.

“With the Company under serious pressure to bring operating costs in line with the current gold price regime, combined with its challenging working capital position and the increasingly difficult regulatory and economic environment in Zimbabwe, and the heightened uncertainty surrounding the implementation of indigenisation policy subsequent to the July 31, 2013 national elections, there is a significant risk that actions more severe than steps taken so far or currently envisaged may be required.

 “If the world price of gold continues to decline further and/or the Company's operational liquidity is further strained, the Company may be forced to consider shutting down some or all of its mining operations in Zimbabwe, either temporarily or permanently, and/or the liquidation of the Company and its assets in formal or informal arrangement,” said the company.

New Dawn’s overall liquidity deteriorated during the quarter ended June 30, 2013 as a result of the falling gold price and the elevated operating costs but it has recently taken several steps to meet its liquidity obligations and is also considering additional steps, depending on the impact of recent initiatives to improve production and reduce costs on operations and cash flows.

As part of this process, the company is working with its suppliers among them power utility Zesa to ensure there will be no termination of power services where Dalny Mine is said to be the most at risk.

 The company conducted a review of the status of the exploration and evaluation of its assets which resulted in a program to sell some of its mining assets that are not considered integral to its long-term strategy.

And it is also continuing attempts to raise additional capital through financing via debt and/or equity issuances and as part of this divestiture process, New Dawn is engaging with several potential parties in an attempt to sell the Old Nic Mine and the Venice Mine.

The gold producer said its efforts to address and improve operating viability at its mine sites in Zimbabwe are subject to various factors outside of its control as it includes taxes and royalties, mining fees, labour rates, power costs, environmental regulations, economic and business environment any of which could impact the company’s operations, capital requirements and ability to operate in a commercially viable manner or at all.