Dalny Mine closure impacts New Dawn revenue

Published: 15 November 2013

New Dawn Mining revenue was adversely impacted by the closure of the Dalny Mine effective August 30, 2013, as well as the continuing decline in the price of gold during the quarter ended September 30, 2013, with the average revenue per ounce of gold sold decreasing by 6.1% to $1,313 per ounce from $1,399 per ounce for the preceding quarter ended June 30, 2013.

The implementation of cost containment initiatives in July 2013 reduced cash costs per ounce to $1,164 for the quarter ended September 30, 2013, as compared to $1,382 for the quarter ended June 30, 2013. The Dalny Mine, which produced 1,397 ounces of gold during July and August 2013 and was closed effective August 30, 2013, had the highest cash operating costs of all of the Company's mines, at $1,507 per ounce, and was the only one of the Company's mines that had cash operating costs in excess of the average revenue per ounce of gold sold during the quarter ended September 30, 2013.

Gold production for the quarter ended September 30, 2013 was 8,884 ounces (8,341 ounces attributable), as compared to gold production of 10,256 ounces (9,370 ounces attributable) for the quarter ended September 30, 2012, a decrease of 1,372 ounces or 13.4% (11.0% decrease on an attributable basis).

As compared to gold production for the previous quarter ended June 30, 2013 of 9,986ounces (9,168 ounces attributable), gold production for the current quarter ended September 30, 2013 decreased by 1,102 ounces or 11.0% (9.0% decrease on an attributable basis).

Consolidated gold sales for the quarter ended September 30, 2013 were $12,164,071 ($11,393,572 attributable), as compared to $16,486,612 ($15,073,167 attributable) for the quarter ended September 30, 2012, a decrease of $4,322,541 or 26.2% (24.4% decrease on an attributable basis). The average sales price per ounce of gold was $1,313 and $1,649 for the quarters ended September 30, 2013 and 2012, respectively, a decrease of $336 or 20.4%.

As compared to consolidated gold sales for the previous quarter ended June 30, 2013 of $13,619,738 ($12,511,340 on an attributable basis), consolidated gold sales for the current quarter ended September 30, 2013 decreased by $1,455,667 or 10.7% (8.9% decrease on an attributable basis). The average sales price per ounce of gold was $1,313 and $1,399 for the quarters ended September 30, 2013 and June 30, 2013, respectively, a decrease of $86 or 6.1%.

Although the Company received approval of its Plan of Indigenisation from the Government of Zimbabwe in October 2013, the implementation of the plan will not alleviate the Company's liquidity issues or provide significant capital for any of the Company's mine development projects. Provided that there are no negative unforeseen or deleterious developments that materially impact the business environment in Zimbabwe and once implementation of the Company's Plan is complete, a step that is likely to take some time, the Company will be positioned to attempt to raise the additional investment capital it requires to move forward.

The Company's efforts to address and improve operating viability at its mine sites in Zimbabwe are subject to various factors outside of its control, including, for example, taxes and royalties, mining fees, labor rates, power costs, environmental regulations, 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 operate in a commercially viable manner or at all.

With the Company under serious pressure to bring total operating costs in line with the current gold price regime, combined with its challenging working capital position and the difficult regulatory and economic environment in Zimbabwe, there is a significant risk that actions more severe than steps taken so far or currently envisaged may be required.

If the world price of gold continues to decline further and/or the Company's operational liquidity is further strained, the Company may be forced to consider shutting down some of its other mining operations in Zimbabwe, either temporarily or permanently, and/or the liquidation of the Company and its assets in formal or informal arrangement.

- businessdaily