HARARE- Zimbabwe Stock Exchange listed gold mining and exploration company, Falcon Gold Zimbabwe Limited (FGZ) has casts a doubt on its future operations citing liquidity challenges, ongoing dispute with RioGold over the payment of proceeds from the Dalny mine sale among others as key drivers towards continued operating losses and negative cash flows.
FGZ said this in its financial update for the half year ended March 31, 2018 for which it registered a total comprehensive loss of $1.6 million.
“While the recent operating difficulties and serious liquidity problems are continuing to affect the Company, exacerbated by the dispute with RioGold over the payment of proceeds from the Dalny Mine sale, these factors have resulted in operating losses and negative cash flows,” said FGZ.
“As a result of these factors, the Company may be forced to shut down some or all of its remaining mining operations in Zimbabwe, either temporarily or permanently, sell some or all of its assets at distressed prices, and/or liquidate the Company and its assets in a formal or informal legal arrangement.”
FGZ said they see no positive changes in the fiscal and base cost environment for gold miners and have blamed the tax conditions as crippling its operations.
“The tax regime remains unfavourable and power tarriffs remain unacceptably high, even though at various times the Chamber of Mines has been assured that gold mining electricity tariffs would come into line with those enjoyed by other sectors in the mining industry,” lamented the group.
FGZ said that the current circumstances some of which like the general macro-economic environment are beyond the company’s control making it difficult for them to continue conducting operations.
“There is serious doubt about the Company’s ability to survive as it is currently configured. Material uncertainties exist outside of the control of the Company, such as the price of gold and the political, business and economic operating environment in Zimbabwe, which could have a material adverse impact on the Company’s ability to operate as a going concern.
“Accordingly, the Company may not be able continue to realize its assets and discharge its liabilities in the normal course of business,” said FGZ
FGZ has however cited there is a gleam of hope as some positive changes in the policy and economic environment for mining in Zimbabwe are beggining to be realised.
“We hope that these new developments will have a meaningful impact on these long outstanding matters,” said FGZ.
“With the recent change to the indigenisation laws, together with various policy pronouncements, it appears that there is an increasing investor appetite for Zimbabwe for the first time in many years.”
FGZ said the efforts being made by the government to address high gold mining power tariffs and “unfavourable tax regime” can help propel the development of the gold mining industry in the country failure of which will continue to curb the potential of the mining sector.
“But until these key factors are addressed, the viability, and hence attractiveness, of the gold mining industry in Zimbabwe will remain sub-optimal,” said FGZ.
The Group is also counting on its equipment upgrade projects to help turn around its current delapidated position.
“The Directors have reviewed and considered the state of the operations, the operating plan of the Company and believe that, at this time, with the upgrades of the equipment essentially complete, and with both Golden Quarry and Camperdown Mines now fully operational, there is a reasonable expectation that the Company will overcome the current adverse operating and financial circumstances,” said FGZ.
FGZ said the challenges cited has led to its failure to do any exploration in the last six months to the year 2018 but hopes to do so in the latter part of the year.
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