HARARE – Canada-based New Dawn Mining Corporation (New Dawn) says its future in Zimbabwe remains uncertain due to indigenisation regulations and continued deteriorating economic and business climate in the country.
The Zimbabwe-focused junior gold miner said that a major underlying factor contributing to the company’s current difficulties has been the more than two-year delay in the still incomplete approval process for its proposed Plan of Indigenisation.
“Combined with limited cash resources in Canada and in Zimbabwe, there is an increasing risk that additional deterioration in the current business and economic environment in Zimbabwe will reduce the firm’s strategic options even further, and will jeopardise the continuing existence of the company,” said New Dawn.
New Dawn operations in Zimbabwe include Turk and Angelus Mine, the Old Nic Mine and the Camperdown Mine, Dalny Mine, Golden Quarry Mine and the Venice Mine, and a portfolio of prospective exploration acreage in the country.
Last month the Toronto Stock Exchange-listed company shut down its Dalny Mine— leaving 900 people unemployed — upon receipt of a notice of disconnection of electrical services from the local power utility, Zesa Holdings.
With liquidity issues rampant, labour problems, and the Robert Mugabe-led government insisting on majority shares in the mine being handed over without compensation, New Dawn has ran out of funds and is now looking at restructuring possibilities.
Approval of the company’s Indigenisation plan had been expected to provide it with access to sufficient investment capital over a period of time, predominantly from international sources, to fund the development and expansion of more cost efficient mining operations in Zimbabwe.
“With the heightened uncertainty surrounding the implementation of indigenisation policy in Zimbabwe subsequent to the July 31, 2013 national elections, there is the likelihood of an increasingly negative effect on the company and thus on its stakeholders,” said New Dawn.
Recent public statements in Zimbabwe imply there may be an evolving policy on indigenisation focusing on seizing 51 percent controlling interests in foreign controlled mines, with compensation deemed to be the intrinsic value of the minerals in the ground.
The financially-troubled miner is now seeking shareholder approval at a special meeting next month to move operations to the Cayman Islands to lower the organisation’s tax burden.
New Dawn is also seeking shareholder permission to consolidate shares on a 100 000:1 basis.
“Under current market conditions, the Board of Directors and management believe that these actions represent the best possible outcome for minority shareholders, leaving the few remaining shareholders, primarily institutional investors, to assume the significant risks and uncertain future of the company,” said the company.
“However, there can be no assurances that these measures will be successfully implemented or that, if implemented, they will enable the company to survive and preserve its operations and assets in Zimbabwe,” added New Dawn.