“There is currently substantial uncertainty surrounding the implementation of the indigenization legislation and the potential impact on the company. There can be no assurance that the company will be successful in its effort to comply with the indigenization legislation.
Accordingly, if the company is unable to obtain approval of the Government of Zimbabwe for its Plan (or amend the Plan in a commercially reasonable manner that is satisfactory to the Government of Zimbabwe), the Company could be required to transfer 51 per cent of each of its Zimbabwe subsidiaries to a ‘designated entity’ with payment uncertain, which would raise significant implications as to the company's ability to continue to conduct its operations in Zimbabwe, as well as to obtain the funding necessary to continue to implement its current business plan,” New Dawn said in a statement released on Monday accompanying its third quarter 2011 financial results.
New Dawn's Zimbabwe operating subsidiaries are Casmyn Mining Zimbabwe (Private) Limited, Falcon Gold Zimbabwe Limited and Olympus Gold Mines Limited, which are all non-indigenous companies and could be severely affected by the Indigenization and Economic Empowerment Act that was signed into law in March.
It, however, said subject to government easing its demands and the successful implementation of its expansion plans, the company would then have the additional working capital resources necessary to support its efforts to increase gold production to 100 000 ounces of gold on an annualized basis by the end of 2014.
Under so-called indigenization laws, the Zimbabwean government requires foreign-owned firms to cede a major stake to indigenous Zimbabweans. Critics have warned that while this was scaring away investors, it would benefit the political elite like the controversial land reform programme during when prime land was taken from mainly-white commercial farmers but ended in the hands of President Mugabe and his inner circle and ill-equipped ‘new’ farmers.’
Meanwhile, New Dawn released a satisfactory set of financial results for the quarter ending June 30 where it said consolidated gold sales totalled US$9,8 million compared to US$3,5 million compared to the same period last year.
Post published in: Mining