New Dawn looks to Europe for growth capital

GOLD mining has over the past five years been hard hit by policy anomalies and funding constraints resulting in most mines suspending operations while others were put on care and maintenance.

 


The liberalisation of the financial markets early this year gave a new lease of life to the industry. Business reporter Bernard Mpofu spoke to New Dawn Mining Corporation chief executive, Ian Saunders on the company’s recent listing on the Frankfurt Stock Exchange (trading as 3DM) and the future of gold mining in Zimbabwe.

Mpofu: New Dawn Mining Corporation has started trading on the Frankfurt Stock Exchange, making it the second on an international bourse after listing on the Toronto Stock Exchange. What has driven your organisation to make this decision and how is 3DM performing?
Saunders: New Dawn Mining Corporation’s current shareholder base is largely North American-based and as part of our strategy to broaden the domicile of our shareholder and investor base, we have recently initiated an investor awareness campaign in respect of New Dawn, in Europe.
The main reason for this is that European investors typically know and understand the risks and rewards of investing in Africa and many have gold and gold equities as part of their investment portfolios.  Thus in establishing market awareness of New Dawn in Europe, we will create an alternate source of capital for New Dawn’s growth plans. The Frankfurt listing is merely part of the European marketing programme and will ultimately allow our European investors and shareholders to trade the shares on the Frankfurt bourse if they choose, which in some instances will be less costly.  
Currently 3DM is performing a little lower than expectations. Certainly with some of the local political and economic issues being unresolved there is some hesitancy on the part of certain investors to aggressively invest in Zimbabwe. Once these matters are resolved we see a very bright future for 3DM.
Mpofu: How is the company’s balance sheet after this listing?
Saunders: The Frankfurt listing was not a public offering but rather the creation of a secondary marketing platform. Thus the listing did not change the financial position of the company.
Mpofu: Does your company have any plans to list on the Zimbabwe Stock Exchange, if not why?
Saunders: At present our company does not plan to list on the Zimbabwe Stock Exchange. This is because currently Zimbabwe has very little on-shore capital. However in due course as the Zimbabwean economy recovers and local institutions have capital to invest in well managed, growth businesses like ours we will certainly be considering creating the local platform to tap those investment dollars.  
Mpofu: We understand that the Reserve Bank of Zimbabwe (RBZ) owes your mining group a significant amount of money in gold deliveries. How much is it and how are the payment delays affecting your operations?
Saunders: RBZ owes us in excess of US$2,5 million. We understand that they have now issued Gold Bonds in respect of these outstanding amounts. The non-payment forced us to cease production (at Turk mine, which resumed operations recently) last year and put our operations on care and maintenance.
The closure cost us more than US$1million in terms of costs and approximately US$3,5million of revenue. We had to take an accounting write down last year in respect of these proceeds and it negatively impacted on earnings. The effect in the medium term has not yet been determined but is not insignificant. Unfortunately the Gold Bonds will not put cash in our treasury until they mature and get paid, which is not certain. We may trade them, probably at a significant discount, to raise cash to grow but our final path has not yet been determined.   
Mpofu: What is the outlook of gold mining in Zimbabwe vis-a-vis international gold prices?
Saunders: At this point, whilst the international gold price looks positive, we as a country are not benefiting. Restarting mines and production ramp ups has been slow due to lack of capital and skills. The lack of capital is due to the fact that investors are still hesitant to invest real dollars, although there is much interest, mainly because of unresolved issues on the Global Political Agreement and the outstanding issue of indigenisation percentages.
We need to have a competitive investment framework of all our industries, including mining and the current framework makes us almost universally uncompetitive.  In the medium term, until our skilled Zimbabweans in the diaspora return home we need to be able to get work permits for certain skilled expatriate staff.
Mpofu: What are the organisation’s short term plans?
Saunders: Growth, growth and growth. We will continue to move towards our goal of becoming a mid-tier Zimbabwean gold miner.

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