Shares in New Dawn Mining (TSE: ND) plunged nearly 14% on Friday after the junior gold mining announced it’s shutting down its 85%-owned Zimbabwe mine.
The Toronto-listed small cap is little traded and is worth $12.7 million with 45 million shares outstanding.
The Dalny mine located in the Kadoma region 175km southeast of Harare, the capital of Zimbabwe and produced 4,711 ounce in the first half of the year. New Dawn produced some $19,000 ounces from its six mines in the Southern African country.
The Zimbabwe Electricity Supply Authority cut power to the project over problems with bill payments and a statement by the Toronto-based company blames the “substantial fall in the price of gold over the last nine months, exacerbated by the impact of previously reported operational problems at the mine, has resulted in a serious liquidity problem.”
The Dalny mine which employs 900 people will be put on care and maintenance and staff have been placed on unpaid leave. The mine’s outstanding trade payables currently total about $3 million.
New Dawn said increasing power and staff costs, harsh royalty regime and an illegal strike contributed to the decision and the company also lays some of the blame for the shutdown on the African nation’s indigenisation policy:
A major underlying factor contributing to the Dalny Mine’s current difficulties has been the more than two year delay in the still incomplete approval process for the Company’s proposed Plan of Indigenisation. A timely approval of the Plan of Indigenisation had been 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 program in the Dalny Mine been implemented and completed as originally anticipated, the Dalny Mine would have been positioned to maintain profitable operations in today’s environment of lower gold prices and increasing costs.