TORONTO, Aug. 30, 2013 /CNW/ - New Dawn Mining Corp. (TSX: ND) ("New Dawn" or the "Company"), a junior gold mining company operating in Zimbabwe, announced that the Company's 84.7% owned Zimbabwe operating subsidiary, Falcon Gold Zimbabwe Limited, has shut down its 100% owned Dalny Mine located in the Kadoma region of Zimbabwe effective as of August 30, 2013.
The Dalny Mine produced 1,949 ounces of gold in the quarter ended March 31, 2013, and 2,762 ounces of gold in the quarter ended June 30, 2013 and employs approximately 900 people in Zimbabwe.
The substantial fall in the price of gold over the last nine months, exacerbated by the impact of previously reported operational problems at the mine, has resulted in a serious liquidity problem. As a result, the amounts owing to the Zimbabwe Electricity Supply Authority ("ZESA") in respect of the Dalny Mine operations were not being paid on a basis acceptable to ZESA, thus causing ZESA to issue a Notice of Disconnection of electrical services to the mine. Without electrical power, the Company cannot operate the mine and was thus forced to 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 the creditors of the Dalny Mine operations to craft a plan that will address the mine's outstanding trade payables, which currently total approximately $3.1 million. The mine is expected to remain on care and maintenance until the Company is able to satisfactorily address the financial and operational issues that contributed to its shut-down or until a potential sale, joint venture or some other arrangement is realised.
A major underlying factor contributing to the Dalny Mine's current difficulties has been the more than two year delay in the still incomplete approval process for the Company's proposed Plan of Indigenisation. A timely approval of the Plan of Indigenisation had been expected to provide the Company with access to sufficient investment capital to fully fund the development of a cost efficient operation at the Dalny Mine. After years of underdevelopment, had an investment program in the Dalny Mine been implemented and completed as originally anticipated, the Dalny Mine would have been positioned to maintain profitable operations in today's environment of lower gold prices and increasing costs.
A combination of further adverse factors, all of which have been previously reported, also contributed to the decision to terminate mining operations at the Dalny Mine. These factors included steadily increasing payroll and power costs and high domestic royalties, taxes and fees, as well as a damaging and costly illegal strike and the lack of full electrical power, both experienced earlier in the year. In the aggregate, these specific difficulties, together with lower gold prices, caused significant operating inefficiencies and high operating costs, thus resulting in the operating losses and negative cash flows at the mine over the past several months.
The Company, at all of its mining operations, is under serious pressure to bring operating costs in line with the current gold price regime. In addition, its Zimbabwe subsidiaries are facing negative working capital positions and an increasingly difficult legislative, regulatory and economic environment in Zimbabwe. Further, as previously reported, there is heightened uncertainty surrounding the implementation of indigenisation policy in Zimbabwe subsequent to the July 31, 2013 national elections, with the potential for an increasingly negative effect on the Company and its stakeholders. The evolving policy on indigenisation now appears to be focusing on seizing 51% controlling interests in foreign controlled mines with compensation deemed to be the value of the minerals in the ground. The Company is continuing its efforts to gain approval for and implement a compliant Plan of Indigenisation.
The result of all of these adverse factors is that there is a significant and growing risk that actions more severe than steps taken so far or currently envisaged may be required, including the temporary or permanent closure of other of the Company's mining operations in Zimbabwe and/or the sale or liquidation of the Company and its assets in a formal or informal arrangement. Further, the Company is currently unable to predict the effect of an inability to conclude or implement an acceptable Plan of Indigenisation. Such failure could result in the termination of the Company's mining licenses in Zimbabwe, the loss of ownership and/or control of the Company's assets and operations in Zimbabwe without monetary compensation, other sanctions against the Company's Zimbabwe operations or subsidiaries, some combination of these actions or some result currently unknown or unforeseen.
A more complete discussion of indigenisation matters and other financial, business and operating risk factors is contained in the Company's Management's Discussion and Analysis for the three and nine months ended June 30, 2013 and 2012, as filed on SEDAR on August 14, 2013.
The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or the accuracy of this release.
Additional information on New Dawn and the matters discussed herein can be obtained on the Company's web-site at www.newdawnmining.com or in the Company's filings on SEDAR at www.sedar.com.
Special Note Regarding Forward-Looking Statements: Certain statements included or incorporated by reference in this news release, including information as to the future financial or operating performance of the Company, its subsidiaries and its projects, constitute forward-looking statements. The words "believe," "expect," "anticipate," "contemplate," "target," "plan," "intends," "continue," "budget," "estimate," "may," "schedule" and similar expressions identify forward-looking statements. Forward-looking statements include, among other things, statements regarding targets, estimates and assumptions in respect of gold production and prices, operating costs, results and capital expenditures, mineral reserves and mineral resources and anticipated grades and recovery rates. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause the Company's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company.Seattle5439 Such factors include, among others, risks relating to reserve and resource estimates, gold prices, exploration, development and operating risks, political and foreign risk, uninsurable risks, competition, limited mining operations, production risks, environmental regulation and liability, government regulation, currency fluctuations, recent losses and write-downs and dependence on key employees. See "Risk Factors" in the Company's Management's Discussion and Analysis - 2012. Due to risks and uncertainties, including the risks and uncertainties identified above, actual events may differ materially from current expectations. Investors are cautioned that forward-looking statements are not guarantees of future performance and, accordingly, investors are cautioned not to put undue reliance on forward-looking statements due to the inherent uncertainty therein. Forward-looking statements are made as of the date of this press release and the Company disclaims any intent or obligation to update publicly such forward-looking statements, whether as a result of new information, future events or results or otherwise.
SOURCE New Dawn Mining Corp.
For further information:
New Dawn investor relations can be contacted as follows:
Telephone: +1 416.585.7890 x 230
E-mail: investor.relations@newdawnmining.com
Visit New Dawn on the internet: www.newdawnmining.com
