Business / Companies
New Dawn initiates cost reduction program
19 Jul 2013 at 04:56hrs | Views
New Dawn Mining announced that it has initiated a wide-ranging cost reduction program aimed at reducing cash operating costs at its five operating gold mines in Zimbabwe. The Company currently employs approximately 3,000 people at these mining operations in Zimbabwe.
The world price of gold reached a 12-month peak of approximately $1,790 per ounce on October 4, 2012. Since then the gold price had decreased to approximately $1,658 per ounce by December 31, 2012, and then to a low of $1,192 per ounce on June 28, 2013 (the last business day in June and a level not seen since mid-2010). During the first half of July 2013, the gold price has been in the range of $1,200 to $1,300 per ounce, but continued volatility is expected. The decline in the gold price since October 2012 has had a significant and increasingly negative impact on the Company's mining operations, profitability and operating cash flows.
As previously reported, in mid-April 2013, in response to the continuing decline in the price of gold, the Company implemented, and has now completed, a strategic review of its production facilities and their operating methods and costs to identify various options to mitigate the impact of the falling gold price. This review included a critical analysis of the Company's mining operations to determine the respective ability of each mine to operate in a commercially viable manner under the current operating and business environment. As the Company continues implementation of the initiatives identified by its strategic review, the Company expects to improve production and significantly reduce mine operating costs. However, if a mine is unable to attain and maintain operations at a cash break-even level in the short-term under the current operating and business environment, the Company has determined to place it on care and maintenance.
As a result of these efforts, the Company reports the following measures have been or are being implemented:
Cessation of all capital development projects except those that need to be commissioned in and/or to sustain operations for the next 6 months.
Implementation of operating cost reduction programs at its mine sites, which have already had a positive impact on operating costs in June 2013 and which are expected to continue to have a positive impact on operating costs in July 2013 and beyond.
Negotiation of temporary price reductions from suppliers for various critical supplies ranging from 5% to 15%.
Successful engagement with its employees through Works Councils at its various mine sites in Zimbabwe, with agreement being reached with employees to reduce basic remuneration by 25% for an initial period of three months effective July 15, 2013. The situation will be reviewed at the conclusion of the three month period. These reductions will be made for all levels of staff in Zimbabwe, including management.
Focus on operating efficiencies, including adjustment to the "cut off" grades that are being mined, with expected improvement in recovered grades and thus gold output.
Elimination/reduction of certain administrative positions in Canada and Zimbabwe.
Reduced or deferred certain costs at the Company's corporate offices in Toronto, Canada, including management compensation and board fees.
The Company expects the above measures to impact results of operations in a meaningful way subsequent to June 30, 2013, and does not expect that their implementation will negatively impact gold production in the short-term. The Company is also exploring other options, including significant changes to its operating and capital structure, divestitures, joint ventures and various structured financings. If any of these initiatives come to fruition, the Company will advise shareholders accordingly.
The company says these actions reflect it's initial response to the recent sustained decrease in the world gold price. In combination with the uncertainty surrounding the implementation of indigenisation policy in Zimbabwe and the current limitations on the availability of investment capital, these factors have placed undue pressure on New Dawn's mining operations in Zimbabwe.
If the aforementioned measures are not sufficient to enable the Company to operate its mines in a commercially viable manner and generate sufficient operating liquidity, or if the world price of gold continues to decline further, the Company may be forced to consider shutting down its operations, either temporarily or permanently, and/or liquidating its assets in a formal or informal arrangement.
The Company's efforts to address and improve operating viability at its mine sites in Zimbabwe are subject to various factors outside of its control, including, for example, taxes and royalties, mining fees, power costs, environmental regulations, 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 operate in a commercially viable manner or at all.
The world price of gold reached a 12-month peak of approximately $1,790 per ounce on October 4, 2012. Since then the gold price had decreased to approximately $1,658 per ounce by December 31, 2012, and then to a low of $1,192 per ounce on June 28, 2013 (the last business day in June and a level not seen since mid-2010). During the first half of July 2013, the gold price has been in the range of $1,200 to $1,300 per ounce, but continued volatility is expected. The decline in the gold price since October 2012 has had a significant and increasingly negative impact on the Company's mining operations, profitability and operating cash flows.
As previously reported, in mid-April 2013, in response to the continuing decline in the price of gold, the Company implemented, and has now completed, a strategic review of its production facilities and their operating methods and costs to identify various options to mitigate the impact of the falling gold price. This review included a critical analysis of the Company's mining operations to determine the respective ability of each mine to operate in a commercially viable manner under the current operating and business environment. As the Company continues implementation of the initiatives identified by its strategic review, the Company expects to improve production and significantly reduce mine operating costs. However, if a mine is unable to attain and maintain operations at a cash break-even level in the short-term under the current operating and business environment, the Company has determined to place it on care and maintenance.
As a result of these efforts, the Company reports the following measures have been or are being implemented:
Cessation of all capital development projects except those that need to be commissioned in and/or to sustain operations for the next 6 months.
Implementation of operating cost reduction programs at its mine sites, which have already had a positive impact on operating costs in June 2013 and which are expected to continue to have a positive impact on operating costs in July 2013 and beyond.
Negotiation of temporary price reductions from suppliers for various critical supplies ranging from 5% to 15%.
Successful engagement with its employees through Works Councils at its various mine sites in Zimbabwe, with agreement being reached with employees to reduce basic remuneration by 25% for an initial period of three months effective July 15, 2013. The situation will be reviewed at the conclusion of the three month period. These reductions will be made for all levels of staff in Zimbabwe, including management.
Focus on operating efficiencies, including adjustment to the "cut off" grades that are being mined, with expected improvement in recovered grades and thus gold output.
Elimination/reduction of certain administrative positions in Canada and Zimbabwe.
Reduced or deferred certain costs at the Company's corporate offices in Toronto, Canada, including management compensation and board fees.
The Company expects the above measures to impact results of operations in a meaningful way subsequent to June 30, 2013, and does not expect that their implementation will negatively impact gold production in the short-term. The Company is also exploring other options, including significant changes to its operating and capital structure, divestitures, joint ventures and various structured financings. If any of these initiatives come to fruition, the Company will advise shareholders accordingly.
The company says these actions reflect it's initial response to the recent sustained decrease in the world gold price. In combination with the uncertainty surrounding the implementation of indigenisation policy in Zimbabwe and the current limitations on the availability of investment capital, these factors have placed undue pressure on New Dawn's mining operations in Zimbabwe.
If the aforementioned measures are not sufficient to enable the Company to operate its mines in a commercially viable manner and generate sufficient operating liquidity, or if the world price of gold continues to decline further, the Company may be forced to consider shutting down its operations, either temporarily or permanently, and/or liquidating its assets in a formal or informal arrangement.
The Company's efforts to address and improve operating viability at its mine sites in Zimbabwe are subject to various factors outside of its control, including, for example, taxes and royalties, mining fees, power costs, environmental regulations, 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 operate in a commercially viable manner or at all.
Source - Byo24News
