JOHANNESBURG (miningweekly.com) – TSX-listed New Dawn Mining on Friday announced that its 84.7%-owned Zimbabwean operating subsidiary Falcon Gold Zimbabwe has shut down its 100%-owned Dalny mine, owing to a liquidity problem caused by the drop in the gold price and operational problems at the mine.

As a result of the liquidity problem, amounts owed to the Zimbabwe Electricity Supply Authority (Zesa) in respect of the mine’s operations were not being paid on an acceptable basis, leading to Zesa having issued a Notice of Disconnection of electrical services to the mine.

“Without electrical power, the company cannot operate the mine and was forced to shut down the Dalny operations. As part of the shutdown, the 900-employee workforce is being placed on unpaid leave and the company is moving the mine into care and maintenance,” New Dawn stated.

New Dawn said an underlying factor that contributed to the mine’s difficulties was the more than two-year delay in the still incomplete approval process of the company’s indigenisation plan.

“A timely approval of the plan was 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 programme been implemented and completed as originally expected, the mine would have been positioned to maintain profitable operations in today’s environment of lower gold prices and increasing costs, the company said.

It added that there was heightened uncertainty surrounding the implementation of indigenisation policy in Zimbabwe, following the 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,” New Dawn stated.

The company was currently unable to predict the effect of an inability to conclude or implement an acceptable plan of indigenisation; however, it stated that such failure could result in the termination of New Dawn’s mining licences in Zimbabwe, the loss of ownership or control of its assets and operations in the country without monetary compensation, other sanctions against New Dawn’s Zimbabwe operations or subsidiaries, or another unforeseen result.

A combination of further adverse factors, such as steadily increasing payroll and power costs, high domestic royalties, taxes and fees, as well as a damaging and costly illegal strike and the lack of full electrical power earlier this year, also contributed to the decision to terminate the mining operations at Dalny.

New Dawn added that it intended to engage with the mine’s creditors to craft a plan to deal with the mine’s outstanding trade payables, which totalled about $3.1-million.

The mine was expected to remain on care and maintenance until New Dawn was able to satisfactorily address the financial and operational issues that contributed to its shutdown or until a potential sale, joint venture or some other arrangement was realised.

The Dalny mine produced 1 949 oz of gold in the quarter ended March, and 2 762 oz of gold in the June quarter.