Falcon Gold records huge loss

In a statement released today, the gold producer said it was faced with significant regulatory and operational challenges.

“The Company realised a net loss of $2,605,705 for the six months ended March 31 2013, as compared to net income of $3,159,185 for the six months ended March 31 2012.

“This change in profitability reflects a difficult operating environment, particularly at Dalny Mine, where both significant power issues and an illegal strike severely impacted operational output, in the face of high fixed costs and a declining gold price,” the company said.

Workers at the mine recently embarked on an industrial action that resulted in a two day work stoppage in February.

The company said the Dalny Mine woes were compounded by the continued delay in the granting of regulatory approval by the Zimbabwe Government for the parent company’s Indigenisation and Economic Empowerment Plan.

“The Company continues to work, through its ultimate parent company, New Dawn Mining Corp on the acceptance of its Final Proposed Indigenisation Implementation Plan,” the statement said.

Falcon Gold produced 8,285 ounces of gold for the six months ended in March 31 2013.

“Of particular note is the fact that there has been a significant downward adjustment to the world price of gold in 2013, from a range of approximately $1,600 -S$1,650 per ounce through March 31 2013, to a range of approximately $1,350 – $1,450 per ounce subsequent to that date.

“The current world price of gold of approximately $1,400 per ounce is roughly $250 – $300 per ounce below 2012 world gold prices,” the company said.

The company said it would look at restructuring and divestitures.

“This review includes a critical analysis of each of the Company’s operations to determine their ability to achieve or maintain profitability under the current operating and business environment,” the company said pointing out that it feared further falls in the price of gold.

“The Company’s operations and development plans could also be impacted by various other factors, including, for example, increased taxes and royalties, mining fees, power and labour costs, 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 conduct operations,” the statement said.

Among other FalconGold’s financial highlights were sales of gold bullion worth $ 14,428,617, a gross loss of $1,068,376 and an operating loss of $2,597,967.

The company said it would continue its efforts to source new funding amounting to approximately $10,000,000, but the delays in regulatory approval, were limiting its ability to access such capital sources.

Falcon Gold has had a challenging recent history after it almost shut its doors at the height of the country’s economic and political instability in 2008 and 2009.