ZIMBABWE Stock Exchange-listed mining firm, Falgold says its turnaround is hinged on proceeds from the sale of Dalny Mine, one of the group’s operations.
In 2014, AIM-listed African Consolidated Resources cancelled plans to acquire Dalny Mine from Falcon Gold after failing to raise $12 million that constituted a pre-condition of the agreement to own the Kadoma-based gold mine.
The news was a blow to Falgold that had hoped to use the cash from the sale to breathe life into its waning operations.
In an abridged circular to shareholders on Tuesday, distressed Falcon mining group said it was management’s view that during fiscal 2017 efforts being pursued have the potential to realise an improved operating performance and financial position.
It said the efforts being pursued have the possibility of arriving at more than a cash neutral position by the end of the 2017 fiscal year.
“The high cost base, coupled with the falling gold price, remains a real and persistent threat to the continued operations of the Golden Quarry/Camperdown Mine.
“However, measures in the form of key growth projects are being put in place to increase the ore production and treatment capacities at the mine, which should raise production volumes and generate increased revenues,” said Falgold.
However, it said, since key growth projects were being funded from the limited cash generated by the mine, they may not be commissioned within the desired time frames.
“The proceeds of the Dalny Mine sale should enable the enhancement of the various projects and that would see the group returning to viability as it may accelerate these projects and fund other new projects,” it said.
Falgold anticipates that the new projects will further enhance its performance by allowing it to realign and rationalise its asset base while providing the much needed growth and working capital.
The mining group recorded a net loss of $1,4 million for the year ended September 30, 2016 compared to a net profit of $6,4 million the previous year.
As at the end of September, the group’s current liabilities exceeded its current assets by $2,3 million with negative equity of $11,3 million.
Low production levels marred the group’s operations, which the board and management blamed on high production costs and falling global commodity prices.
Dalny Mine was closed in August 2013 and placed under care and maintenance after Falgold cited liquidity problems triggered by falling gold prices and operational challenges such as high power costs.