Falgold stops all exploration as gold sector remains subdued


Gold production was at 4 798 ounces while sales were 42 percent lower at 4 982 ounces compared to 8 285oz last year.

FALCON Gold Zimbabwe says it foresees a bleak outlook for the group in 2016 owing to a myriad of operating challenges.

Chief Executive Officer Ian Saunders in the group’s results statement said despite management’s focus to operate the group through addressing short term issues, there can be no assurances that the company will be able to survive as a going concern as it is currently configured.

“Accordingly, the group may be forced to consider shutting down its remaining mining operation, either temporarily or permanently, placing one or more assets under court protection from creditors or liquidating the group and its assets in a formal or informal arrangement,” he said.

Saunders said the group has stopped all exploration and new project development due to lack of current profitability and the economic viability of its mines in the current gold price and cost regime.
The group said it had anticipated the mooted change to the tax and power cost base to change while the company also had planned upgrading Golden Quarry mine to assist the group to sustain profitable operations.

“This reality, coupled to a further roughly US$100 per ounce drop in the gold price in the last 12 months, correlates into a bleak outlook for the group in fiscal 2016,” he said.

Saunders however said the toll agreement at Dalny mine has brought some interim liquidity relief to the group, but the arrangement is not a long term solution as it is scheduled to terminate in late 2016.

“The group is looking at various strategies to replace this lost revenue but there can be no assurances that the group will be successful in this regard,” he said.

Stringent cost control measures and curtailed non-essential development programmes saw Falgold narrow its loss position in the six months to March to US$1,65 million from a loss of US$2 million last year, a change of 36 percent.

Gold production was at 4 798 ounces while sales were 42 percent lower at 4 982 ounces compared to 8 285oz last year attributed to the closure of Dalny Mine. The mine, as previously reported was shut down in August last year. Bullion sales were down 56,2 percent to US$6,3 million from US$14,42 million last year.

The average sale price was at $1 274 against $1 636 last year. CE Ian Saunders said at the current levels, with the prevailing tax regimes, rigid labour laws and the high power costs, operating profit is nonexistent. In the period the operating line was a negative $1.61 mln.

Mining and processing costs were down to US$6,68 million from US$15,49 million last year, resulting in a negative operating margin of -5,8 percent. “Costs fell due to the closure of Dalny and cost cutting measures necessitated by the large decline in the gold price.”

The care and maintenance costs at Dalny Mine totalled US$774 475 but admin costs for the group fell 18,2 percent in dollar terms but increased to 13,9 percent of mining and processing costs against 7,3 percent last year. “This trend is due to lower revenues as a result of the closure of Dalny Mine.”

Total assets on the balance sheet were at US$8.6 mln from US$9.8 mln last year while there was a deficiency in the equity as a negative US$16.25 mln. The group accounted for a rehabilitation provision of US$4.6 mln.

The group said it would now focus on completing the re-organisation of the holding and operating structures of the company, to be able to comply with IEE laws and to facilitate debt funding into Golden Quarry to fund a planned upgrade. The group also wants to initiate a large scale dump re-treatment project in the same area.

The group said current production at Golden Quarry and Camperdown Mine was stable. The two mines are situated in Gweru. Both mines are in definition stage. FinX

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