Tuesday, August 06, 2013

(NEWZIMBABWE) Miner Cuts Wages AS Gold Price Dips
19/07/2013 00:00:00
by Business Reporter

GOLD miner New Dawn Mining has warned that it might have to shut or sell its operations in the country if the gold price continued to slide and its cost-reduction measures failed.

New Dawn, which operates five mines in the country employing about 3000 people, is implementing measures to drive down costs following a strategic review of its operations in an April review.

Lower gold prices, combined with the uncertainty surrounding the implementation of the indigenisation programme and current limitations on the availability of investment capital, have placed "undue" pressure on New Dawn's mining operations.

Gold slid to a low of $1 192/oz on June 28 - a level not seen since mid-2010 - and despite a recent rebound taking the metal to a range of $1 200/oz to $1 300/oz in July, prices are still well below the high of $1 889/oz in 2011.

“The decline in the gold price since October 2012 has had a significant and increasingly negative impact on the Company’s mining operations, profitability and operating cash flows,” the company said.

The Canada-listed junior has now frozen all capital development projects, except those needed to sustain production for six months. It also negotiated temporary price reductions with suppliers of various critical supplies, ranging from 5% to 15%.

New Dawn said it had successfully negotiated an initial 25% wage reduction pertaining to all the occupation levels of its 3 000 employees.

The company added that it would eliminate, or reduce, certain administrative positions in Canada and Zimbabwe, and that it had already reduced, or deferred, certain costs at its corporate offices in Toronto, including management compensation and board fees.

Further, New Dawn said it would focus on operating efficiencies, including adjusting the cut-off grades that were being mined, which could help improve the recovered grades and resulting gold output.

“If (these) measures are not sufficient to enable the company to operate its mines in a commercially viable manner and generate sufficient operating liquidity, or if the world price of gold continues to decline further, the company may be forced to consider shutting down its operations, either temporarily or permanently, and/or liquidating its assets in a formal or informal arrangement,” management said in a statement.

“The company’s efforts to address and improve operating viability at its mine sites are subject to various factors outside of its control, including, for example, taxes and royalties, mining fees, power costs, the (local) economic and business environment, and potential changes to the legislative and regulatory environment, any of which could impact operations, capital requirements and ability to operate in a commercially viable manner or at all.”

The company said it did not expect the cost-reduction measures to negatively impact on gold production in the short term, adding that it was exploring other options, including significant changes to its operating and capital structure, divestitures, joint ventures and various structured financings.

New Dawn reported a 4.7% year-on-year increase in gold production to 9,986 oz in the June quarter, of which 9,168 oz were attributable to the company. Its gold sales, on a consolidated basis, declined by 10.2% to $13.62-million, compared with $15.16-million a year earlier.

The average sales price per ounce of gold declined to $1,399 for the June quarter, from $1,608 in the March quarter.
New Dawn owns 100% of the Turk and Angelus, Old Nic and Camperdown Mines.

In addition, through its Falcon Gold Zimbabwe Limited subsidiary, the company currently owns 84.7% of the Dalny, Golden Quarry and Venice Mines, and a portfolio of prospective exploration acreage in the country.

With the exception of the Venice Mine, all the mines are currently operational.


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