We have extracted a excerpt from the 2019 half year interim report for Falcon Gold Zimbabwe (FALG.zw), listed on the Zimbabwe Stock Exchange:
In our Statement to Shareholders accompanying the 30 September 2018 year-end financial statements, we reported that there was a catastrophic engineering failure of the main operating mill at Golden Quarry Mine, which adversely affected production and cash flows. Termination of power supplies by ZETDC further compounded the problems. As a result of this and other cash flow challenges, the Golden Quarry Mine has not been operational. Management has undertaken a full impact assessment and is evaluating various options to deal with the situation including either repair, refurbish or outright replacement of the mill. Notwithstanding the mill failure, to date the funding required to execute the 2019 Budget has not been provided and discussion with the company’s majority shareholder are ongoing.
There have been some positive developments in the operational macro environment for the mining industry as compared to previous years although the tax regime remains unfavourable. The gold price has remained favourable and is predicted to continue the upward trend in the foreseeable future. The power supply situation remains unstable although it is believed that there could be some improvements going forward with the mining industry set to be on dedicated power supply. Management is currently working hard to ensure that as soon as funding is received and some minor repairs to the plant undertaken, the Golden Quarry Mine will resume operations.
The Group sustained losses attributable to the shareholders of the Group during the six months ended 31 March 2019 amounting to $27 224 725 (2018: $1 681 348). The Group had a net working capital deficit at 31 March 2019 of $11 329 680 (30 September 2018: $6 748 056) and negative equity of $44 386 023 at 31 March 2019 (30 September 2018: $17 161 298). The Group continues to incur losses. We obtained a letter of support from the ultimate holding company New Dawn Mining Corporation, which states that they will not demand repayment of loans in the 12 months after period end and will extend principal repayments due for another year.
The Board and management, with the assistance of the majority shareholder, are exploring options for additional US$2.5m – US$3m of funding to enable repair of the mill and resuscitation of mining operations but have not finalised the funding structure.
The interim financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.
The delay in the publication of the March 2019 Interim Financial Results was caused by the delayed publication of the September 2018 Financial statement as per the cautionary statement to the shareholders dated 17 December 2018.
The company’s shares were suspended from trading on the 5th of February 2019, on application by the company to ZSE, as the company had not finalised the September 2018 Financial statements in time. After the publication of the Falgold 2019 half year results, the company will be making an application to ZSE to resume trading of the shares.
I am thankful to board colleagues, management and staff for their dedication. I am also grateful to our suppliers for their continued.
IAN R SAUNDERS
FOR THE BOARD