Doom as Dalny Mine closes

By Daniel Chigundu

President Mugabe...in a fix

THE country’s mining sector which had been showing some signs of growth since dollarization has been dealt a major blow following the closure of Canadian owned Dalny Mine.

Dalny Mine a subsidiary of Toronto listed mining company New Dawn closed shop on August 30, following alleged power disconnection notice from Zesa.

In its quarterly results for the month ending June 30, New Dawn had expressed fears for this closure, but had hoped that it would not come through as they were putting their all in trying to address the issue.

In a statement New Dawn said it was placing the mine under care and maintenance while workers will go on unpaid leave.

“Without electrical power, the company cannot operate the mine and thus forced shut down the Dalny Mine operations.

“As part of the shut-down, the Dalny Mine workforce is being placed on unpaid leave and the company is moving the Dalny Mine to care and maintenance.

“The company intends to engage with creditors of the Dalny Mine operations to craft a plan that will address the mine’s outstanding trade payables, which currently total approximately US$3.1 million.

“The mine is expected on care and maintenance until the company is able to satisfactorily address the financial and operational issues that contributed to its shutdown or until a potential sale, joint venture or some other arrangement is realised,” the statement said.

While the Tetrad report agreed that there was something to do with power problems at Dalny Mine it also revealed that issues to do with the delayed approval of the indigenization process, increasing payroll and power costs, high domestic royalties, taxes and fees might have prompted the untimely closure.

Tetrad said the closure of Dalny Mine paints a doom picture for the country and mining sector since mining is one of the key contributors to the Gross Domestic Product (GDP). Mining accounted for 16 percent to the national coffers in 2012 and its closure might pose some challenges for the new government.

“Closure of Dalny Mine does more harm than good for the sector. At a time when the growth of the sector was downgraded from 17.1 percent to 5.3 percent, closure of Dalny Mine implies low gold output.

“Electricity tariffs and royalties are continuously rising at a time when global commodity prices are weakening. This is reducing operational performance of most mining houses thus leading to a reduction in overall earnings for the sector.

“Added to that, the absence of medium to long term finance means the outlook for the sector is likely to remain bleak. Thus there is need for policy makers to address the critical issues for the sector and promote rather than dissuade investment,” said the Tetrad report.

New Dawn has however indicated that they will not hesitate to close all their mines in Zimbabwe should the operating environment continue to be unattractive for business.

The company is reportedly also in the process of reviewing 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.

The mining giant is currently engaged with several potential parties in an attempt to sell two of their mines Old Nic Mine and the Venice Mine.

Mining is a high capital business in the country and lack of lines of credit to recapitalize is reportedly hampering production and has forced some companies to put their mine under care and maintenance.