Falcon Gold says it has stopped all new project development due to the current lack of profits and the viability 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 has not 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 did not improve in the period,” said Mr Saunders.
Gold sales for the year were down to 312 kilograms from 556kg 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.
Mr 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 implemented if and when the required capital becomes available.
Mr 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 with potential investors for possible joint ventures or partnerships to restart Dalny Mine.Thousands of jobs are considered to be under threat.
