FALCON Gold Zimbabwe Limited posted a $2,6 million loss for the six months ending March compared to a profit of $3,1 million recorded during the same period last year due to rising operating costs and declining output, the company has said.
Business Reporter
Company chairperson Ian Saunders said frequent power outages and an industrial action carried out at Dalny Mine during the period under review had also affected mining operations.
In the six-month period, the company produced 8 285 ounces of gold as compared to 9 819 ounces during the same period last year.
During the period under review, the average sale price of gold was $1 636 per ounce as compared to $1 688 per ounce in 2012.
“The company’s operations and development plans could also be impacted by various other factors, including, for example, increased taxes and royalties, mining fees, power and labour costs, the economic and business environment in Zimbabwe, and potential changes to the legislative and regulatory environment in Zimbabwe, any of which could impact the company’s mining operations, capital requirements and ability to conduct operations,” Saunders said.
Mining and processing costs increased to $15 496 993 resulting in a -7,4% operating margin for the six months ended March 31 2013, as compared to $11 615 003 resulting in a 29% operating margin, for the six months ended March 31 2012.
“This change in profitability reflects a difficult operating environment, particularly at Dalny Mine, where both significant power issued and an illegal strike severely impacted operational output, in the face of high fixed costs and a declining gold price,” Saunders said.
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“The operating margin deteriorated in the six months ended 31 March 2013,as compared to the six months ended 31 March, for the aforementioned reasons as well as almost 10% salary and wage cost inflation in the face of high, unsustainable, power costs, together with high indirect taxes,” he said.
“Operating margin is a ratio used to measure a company’s pricing strategy and operating efficiency.
“The company has identified two developments projects with relatively low capital costs and high operating margins that the company estimates would have short implementation time of less than six months.
“However, these projects require specific financing, for which the company is continuing its efforts to source new funding amounting to approximately $10 million, but delays in regulatory approval as indicated are limiting the company’s ability to access such capital resources.”
Saunders said a fall in gold prices on the world market was also expected to affect the company’s performance.
The precious metal is currently trading at an average of $1 400 per ounce from an average of $1 700 recorded last year.
“As a result of the decrease in the world gold price in 2013 and the negative impact on the company’s operations, the company has implemented strategic review to identify various alternatives, including restructuring and divestures, in order to enable the company to take appropriate actions under the circumstances.
“The company is also considering operational changes that may be necessitated by a further decrease in gold prices,” Saunders said.
