Falgold on brink of closure

Roadwin Chirara/Ndamu Sandu

GOLD producer Falcon Gold (Falgold) says viability problems will force it to shut down all its mining operations in Zimbabwe despite the gold price review announced last week by t

he Reserve Bank of Zimbabwe (RBZ).


RBZ governor Gideon Gono last week reviewed the price of gold to $130 000 per gramme, up from last year’s $92 000 after serious lobbying from the mining industry.


Gono said producers who wanted to retain part of their gold proceeds in foreign currency would sell 60% at the going support price, and 40% at the international gold price and retain the foreign exchange proceeds in their foreign currency accounts (FCAs).


But Falgold said the price increase made last week was still not enough to keep their mines running.


Falgold’s financial director, Garry Perotti, told businessdigest this week that the company could shut down in the next six months if the situation does not improve.


“Looking at figures, it does not look good for the company, we might have to close down. I do not think the company will still be operating by the next monetary policy review,” said Perotti.


He said high operational costs continued to erode the company’s revenue. Perotti said the cost of electricity and labour had increased significantly.

He said the new minimum wage for the industry, currently pegged at $735 000 per month was too high.


The new wage structure had to be backdated to April. A 33% increase was awarded from April 1, another 33% awarded from July 1 and a further 53% increase was awarded from October 1.


Perotti said Falgold had made representations to the Chamber of Mines on its current operational problems and had recommended a price adjustment in an effort to break even. He said the company was currently looking at raising the $4,7 billion which is required for operational costs this year.


The situation has been worsened after potential offshore investors refused to inject more funds to save the company. The investors cited the high risk associated with the sector.


“The lack of investor confidence is worsening the situation as investors are not willing to invest because of the uncertainty on their investments,” Perotti said.


Falgold, Perotti said, was currently mining low-grade ore because of the lack of funds to mine deeper where higher grades of ore are found.


“We get our operating finance from the mines and if the qualities from the mines remain low, then really the situation is one where we have to take the only appropriate action,” said Perotti.


Founded in 1991, Falgold operates Dalny Mine (Chakari), Venice Mine (Kadoma) and Golden Quarry & Camperdown Tribute (Shurugwi).