FALCON Gold Zimbabwe (Falgold), a subsidiary of the Luxemburg-based Falcon Investments Holdings Societe Anonyme, has fallen on hard times due to unfavour
able gold prices and could issue a cautionary giving notice of closure, businessdigest established this week.
The gold mining firm, which controls Venice and Dalny mines as well as the Golden Quarry & Camperdown Tribute, has experienced acute cash-flow problems, raising fears of possible closure in the absence of remedial measures by the government and monetary authorities.
Sources indicated that Falgold’s management had been frustrated by government failure to address the company’s concerns over insufficient prices offered to gold producers despite numerous representations to government and the Reserve Bank of Zimbabwe (RBZ) over the last 10 years.
The gold prices had curtailed any exploration and development activities at Falgold’s mines and the company’s position had been directly affected by the poor gold prices paid by the government over the past 10 years.
The situation has become so dire that Falgold’s finance director, Garry Perotti, last month wrote to Fidelity Printers and Refiners, an RBZ subsidiary exclusively responsible for the buying of gold in the country, highlighting fears that Falgold could halt operations because of uneconomic prices being offered for gold purchases by the RBZ.
Perotti’s letter, dated May 18 and addressed to Fidelity’s managing director, Paul Musuka, was copied to RBZ governor Gideon Gono, Mines minister Amos Midzi, Finance minister Herbert Murerwa and the Chamber of Mines.
The letter, a copy of which was seen by businessdigest yesterday, indicated that Falgold had suffered significantly due to a “payment regime” discouraging exploration and development of gold mines.
“I do not mean to pressurise you, but unless the authorities revise the gold price immediately, the company will have to place a cautionary in the press and give notice of closure,” Perotti said in the letter.
Although the notice had been earmarked for publication at the end of May, Falgold’s management later moved it to the end of next month.
“It would be appreciated if you could inform the authorities of the critical situation our company is in, and that should the company close, the production of between 40 to 47 kgs of gold per month will come to an end,” said Perotti.
Perotti could not be contacted for comment yesterday as he was reportedly out of office until next week, but Falgold’s operations director, Ian McPherson, confirmed the group was going through a very difficult period and could issue a cautionary to shareholders soon.
“You could ask the managing director (David Beatte) about the cautionary. I have not discussed it with him yet but it’s something that we’ll have to issue according to stock exchange regulations,” said McPherson.
Beatte was reportedly on a tour of mines when businessdigest contacted his office yesterday.
Cash-flow lodgings for gold mines are 60% in Zimbabwe dollars and 40% in US dollars.
Perotti said electricity outages had affected monthly production by approximately 15% or seven kgs of gold amounting to $17,5 billion.
“The company increased production to 200 kgs of gold per month in 1996. Since then, with the payment regime of government not allowing for exploration and development expenditure, production has steadily declined to the current level of below 50 kgs of gold per month,” said Perotti.