Falgold ceases gold production

Falgold ceases gold production
Published: 14 August 2019 (109 Views)
Troubled mining group Falgold Zimbabwe published its delayed financial statements for the year ended 31 September 2018. During this period the group's net loss after tax widened by 609% to US$4.9 million leaving earnings per share at - US$0.04 cents.
 
Revenue for the year fell by 1% to U$6.8 million with the groups gold production falling by 51% to 78kgs following industrial action by employees and other operational challenges. The significant output was offset by firmer average gold prices for the year, with the group reporting at US$1,277/ounce against US$1,243/ounce in 2017.
 
The group reported a 2-month strike between January and March 2018 at the Golden Quarry Mine, which resulted in flooding and damage to equipment that delayed the resuscitation of operations to June 2018.

The groups worsening net loss position stemmed from an impairment of US$2.1 million made to the group's main operating mill at the Golden Quarry Mine Complex. The adjustment was made following a "catastrophic break down" experienced post financial year which led to a complete stop in gold production. Additionally, power supply had been cut from the mine as a result of non-payment of utility bills.
 
Despite the decline in the bottom line, the groups gross operating loss narrowed by 56% to US$1.6 million as did the net operating loss by 37% to US$3.2 million. This was attributed by the group to reduced operating expenses due to the termination of a major mining contract. Subsequently, mineral production expenses were down 20% to US$8.4 million although general and administration expenses were up 16% to US$1.3 million.
 
The net loss saw the group's Total Equity fall by 39% to –US$17.2 million while the liquidity indicators worsened to a current ratio of 0.4 and an acid test ratio of 0.3. Further to that the group's net cash position is at –US$9.2 million and its debt ratio is at 200% following the impairments.
 
The commentary in the Falgold's financial statements delved into the groups ongoing challenges, noting "Due to the serious liquidity problems, the continued absence of significant investor appetite for Zimbabwe, and the lack of operating profits, management of the Group is, of necessity, operating the Group with a determined focus on addressing short-term issues as they arise, but there can be no assurances that the Group will be able to continue to conduct operations should existing circumstances persist."
 
In the meantime, the group's strategy is to introduce of a number of cost containment measures, reduction in marginal grade areas mined, and efficiency enhancement initiatives as well as efforts to restructure operations and reduce costs.
 
Regarding the failure of the Golden Quarry Mill, the group is apparently evaluating various options to deal with the situation, including either repair, refurbish or outright replacement of the Mill. Further to that the group is exploring options for an additional US$2.5 million of funding to enable repair of the mill and resuscitation of mining operations, but have not finalized the funding source or structure. As for its standing debts of US$9.3 million, the group obtained a letter of support from its holding company New Dawn Mining Corp allowing the delay of debt repayments for the 12 months following the financial year end.

- FinX

Tags: Gold, Falgod, Mining,
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