New Dawn Reports Results for the Quarter Ended December 31, 2012
TORONTO, Feb. 14, 2013 /CNW/ - New Dawn Mining Corp. (TSX: ND) ("New Dawn" or the "Company"), a junior gold company focused on developing its gold mining assets and operations in Zimbabwe, announced that its financial results and corresponding Management's Discussion and Analysis for the quarter ended December 31, 2012 have now been filed on SEDAR at www.sedar.com and are also available on the Company's web-site at www.newdawnmining.com.
Unless otherwise indicated, all amounts presented are in United States dollars.
NEW DAWN OPERATIONAL OVERVIEW
During the quarter ended December 31, 2012, the Company's mining operations faced multiple challenges, including power issues caused by transformer failures and limitations on immediate access to economically viable ore grade material for processing at the Dalny Mine and grade and processing issues encountered at the Golden Quarry Mine, as well as continuing power outages at the Old Nic Mine.
As a result, production for the quarter decreased by approximately 11.6% (9.9% decrease on an attributable basis) compared to the quarter ended September 30, 2012, and approximately mirrored production achieved for the quarter ended December 31, 2011. However, although the quantity of gold produced was comparable with a year earlier, due to the aforementioned issues, overall plant throughput was significantly reduced, as compared to both the quarter ended September 30, 2012 and the quarter ended December 31, 2011.
The power and ore issues at the Dalny Mine continued into January 2013 and were exacerbated by the effect of an illegal work stoppage during the second half of January 2013. The transformer failure that occurred in mid-December 2012 was remedied during January 2013, and full power was available by February 1, 2013. Although underground operations at the Dalny Mine are increasing as the Company gains access to lower levels, sourcing of adequate material for processing continues to be a challenge. As a result of these various factors, it is anticipated that operations at the Dalny Mine during the quarter ending March 31, 2013 are likely to be adversely affected.
Electrical supply problems that have been encountered at the Old Nic Mine since its acquisition in 2010 were finally solved in late December 2012 with the installation of a continuous power supply by the Zimbabwe Electricity Supply Authority.
In response to these operational issues and other external factors, the Company has revised its near-term operating strategy to improve operating efficiencies and processes through a focus on a steady-state production model based on currently installed plant and infrastructure.
Further development of the Company's mining operations and exploration programs is premised, in substantial part, on access to adequate debt and/or equity financing, which, in turn, is conditional on finalisation and implementation of the Company's Plan of Indigenisation. The Company's operations and development plans could also be impacted by various other factors, including, for example, the world price of gold, taxes and royalties, mining fees, power and labour costs, the operating environment in Zimbabwe, and potential changes to the legislative and regulatory environment in Zimbabwe, any of which could impact mining operations and the Company's capital requirements.
SELECTED FINANCIAL INFORMATION
This selected financial information should be read in conjunction with the Company's interim unaudited consolidated financial statements, including the notes thereto, for the periods referenced.
Quarterly Results (Unaudited)
The following table sets forth select unaudited condensed consolidated interim financial and other information for the Company for the quarter ended December 31, 2012, as compared to both the immediately preceding quarter ended September 30, 2012, and to the quarter ended December 31, 2011.
| Quarter ended | December 31, 2012 |
September 30, 2012 |
December 31, 2011 |
|
| Operations | ||||
| Revenue | $16,612,476 | $16,486,612 | $15,440,766 | |
| Net income (loss) allocable to common shareholders |
$(826,870) | $(523,683) | $2,104,104 | |
| Earnings (loss) per share - basic and diluted |
$(0.02) | $(0.01) | $0.05 | |
| Other measures | ||||
| Ounces of gold: | ||||
| Produced | 9,069 | 10,256 | 9,095 | |
| Sold | 9,705 | 9,995 | 9,171 | |
| Cash Costs per ounce (1) | $1,403 | $1,275 | $1,029 | |
| Revenue per ounce | $1,712 | $1,649 | $1,684 | |
| Adjusted EBITDA (1) | $(319,064) | $695,942 | $3,674,942 | |
| Attributable (1) | ||||
| Revenue | $15,332,853 | $15,073,167 | $14,238,642 | |
| Ounces of gold: | ||||
| Produced | 8,440 | 9,370 | 8,399 | |
| Sold | 8,956 | 9,137 | 8,460 | |
(1) Cash costs per ounce, Adjusted EBITDA and Attributable measures are not recognized accounting measures under International Financial Reporting Standards ("IFRS") (see "Non-IFRS Measures").
Non-IFRS Measures
The Company has included herein certain performance measures that are not recognized accounting measures under IFRS, specifically, Adjusted EBITDA, Cash Costs per Ounce, and Attributable measures. These non-IFRS performance measures do not have any standardised meaning and, therefore, are not necessarily comparable to similar measures presented by other companies. However, the Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors may find this information useful in their evaluation of the Company's performance. Accordingly, these non-IFRS measures are intended to provide additional information and they should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
Total and Attributable Ounces of Gold
Total ounces includes all of the ounces that are under the control of the Company and its subsidiaries. This measure is consistent with the method of consolidation used to prepare the Company's consolidated financial statements.
Attributable ounces are the quantities calculated on the basis of the Company's proportionate ownership of its subsidiaries, thereby removing the minority interests' notional allocation of ounces from total ounces. Accordingly, attributable ounces and any financial information based on attributable ounces are non-IFRS based measures.
Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
Earnings (loss) before interest expense (net of interest income), income taxes, and depreciation and amortization ("EBITDA") is a metric that is used by some investors to measure the cash earning capacity of a company's business operations without the distortion arising from both varying capital structures and different tax legislations that apply in different jurisdictions. EBITDA is different from cash flow from operations appearing in the consolidated statement of cash flows in that it does not take into account net interest expense and tax payments or changes in non-cash working capital. It is also different from free cash flow in that it excludes the cash required to replace capital assets.
As EBITDA is used by some investors as a surrogate or supplemental cash earnings metric, the Company further adjusts EBITDA by eliminating the impact of impairment expense (net of impairment recoveries) and stock-based compensation expense, both non-cash expenses ("Adjusted EBITDA"). During the year ended September 30, 2012, the Company revised Adjusted EBITDA to remove overhead from non-operational properties from the calculation.
Cash Costs per Ounce
The Company calculates this metric from mining and processing costs reported in its statement of income and comprehensive income, excludes royalties and levies, and adjusts for the change in production activity.
Additional information on these measures and their calculation is included in the Company's Management's Discussion and Analysis for the quarter ended December 31, 2012 filed on SEDAR (www.sedar.com) and available on the Company's web-site (www.newdawnmining.com).
REVIEW OF FINANCIAL RESULTS
Summary
As previously described, the challenges encountered during the quarter ended December 31, 2012 resulted in decreasing operational efficiency, particularly at the Dalny Mine. Except for the power supply issues at the Old Nic Mine, there were no similar issues occurring during the comparable year earlier quarter ended December 31, 2011.
Gold Production
Gold production for the quarter ended December 31, 2012 was 9,069 ounces (8,440 ounces attributable), essentially unchanged as compared to gold production for the quarter ended December 31, 2011 of 9,095 ounces (8,399 ounces attributable).
As compared to gold production for the previous quarter ended September 30, 2012 of 10,256 ounces (9,370 ounces attributable), gold production for the current quarter ended December 31, 2012 decreased by 11.6% (9.9% decrease on an attributable basis).
Gold Sales
Consolidated gold sales for the quarter ended December 31, 2012 were US$16,612,476 (US$15,332,853 attributable), as compared to US$15,440,766 (US$14,238,642 attributable) for the quarter ended December 31, 2011, an increase of 7.6% (7.7% increase on an attributable basis). The average sales price per ounce of gold was US$1,712 and US$1,684 for the quarters ended December 31, 2012 and 2011, respectively.
As compared to consolidated gold sales for the previous quarter ended September 30, 2012 of US$16,486,612 (US$15,073,167 attributable), consolidated gold sales for the current quarter ended December 31, 2012 increased by 0.8% (1.7% increase on an attributable basis). The average sales price per ounce of gold was US$1,712 and US$1,649 for the quarters ended December 31, 2012 and September 30, 2012, respectively.
100% of proceeds from gold sales were received in US dollars.
Net Income (Loss) Allocable to Common Shareholders
Net income (loss) allocable to common shareholders was $(826,870) for the quarter ended December 31, 2012 ($0.02 loss per share, basic and diluted), as compared to $2,104,104 ($0.05 per share, basic and diluted) for the quarter ended December 31, 2011. As a result of the factors previously discussed, operating results for the quarter ended December 31, 2012 were negatively impacted by significantly higher mine operating costs.
Adjusted EBITDA
Adjusted EBITDA for the quarter ended December 31, 2012 was $(319,064), as compared to $3,674,942 for the quarter ended December 31, 2011, reflecting the significantly higher mine operating costs as discussed above.
Cash Costs per Ounce
The previously noted challenges encountered at the Dalny Mine during the quarter ended December 31, 2012, together with the difficulties faced at the Golden Quarry Mine and the Old Nic Mine, had an adverse impact on cash costs. As illustrated in the table below, the positive operating results from Turk and Angelus Mine were insufficient to outweigh the substantial additional costs incurred at the Dalny Mine. The net result is an elevated average cash cost for all mines for the quarter ended December 31, 2012 of $1,403 per ounce.
Production and cash costs by mine for the quarter ended December 31, 2012 were as follows:
| Turk and Angelus Mine |
Old Nic Mine | Golden Quarry/ Camperdown Mine |
Dalny Mine | Total | |
| Total quantity of gold produced (ounces) |
4,295 | 668 | 2,239 | 1,867 | 9,069 |
| Total cash costs | $4,561,227 | $1,188,389 | $2,973,489 | $4,005,325 | $12,728,430 |
| Cash costs per ounce |
$1,062 | $1,779 | $1,328 | $2,145 | $1,403 |
The Company's short-term focus is to concentrate on stabilising production with the existing plant and infrastructure, and to improve mine site efficiencies and processes. At the Old Nic Mine, the installation of a continuous power supply at the end of December 2012 will avoid future costly and lengthy power outages that have been experienced over the last several years, thereby allowing improvement to the mine's cash costs per ounce. Underground and stockpiled ore is now being used as the source of material for processing at the Golden Quarry Mine, replacing the marginally viable material from the open cast area of the adjacent Camperdown Mine. At the Dalny Mine, the January 2013 work stoppage has been resolved, the power supply has been restored effective February 1, 2013, and the quantity and quality of underground ore is improving, thus allowing the Company to work towards reducing its cash costs per ounce to profitable levels.
OPERATING IN ZIMBABWE
Contributions to the economy of Zimbabwe
During the three months ended December 31, 2012 and 2011, and the year ended September 30, 2012, the Company's Zimbabwe operations made payments to the Zimbabwean Government and its agencies as follows:
| Three months ended December 31, | Year ended September 30, |
|||
| 2012 | 2011 | 2012 | ||
| Gross revenue | $ 16,612,476 | $ 15,440,766 | $ 61,947,433 | |
| Taxes and levies | ||||
| Corporate taxes | $ - | $ - | $ 187,315 | |
| Royalties | 1,145,960 | 695,774 | 3,983,195 | |
| Duty | 145,147 | 460,310 | 1,009,523 | |
| Licenses and levies | 47,012 | 40,681 | 267,638 | |
| Rural electrification levy | 148,850 | 103,508 | 487,507 | |
| Payroll remittances | ||||
| Deductions from employees | 742,617 | 718,493 | 3,116,704 | |
| Employer contributions | 441,066 | 397,596 | 1,444,958 | |
| Total, taxes and levies | 2,670,652 | 2,416,362 | 10,496,820 | |
| Percentage of reported gross revenue | 16.1% | 15.6% | 16.9% | |
| Government controlled entities | ||||
| Electricity (ZESA) | $ 2,918,640 | $ 2,029,582 | $ 9,071,452 | |
The government received, directly and indirectly, but excluding power costs, an amount equal to 16.1% of gross revenue for the three months ended December 31, 2012. In addition, the Company sourced approximately 70% of its equipment and consumable supplies and services from Zimbabwe-based suppliers, and total expenditures in this regard were approximately $6.4 million for the three months ended December 31, 2012 and $25.9 million for the year ended September 30, 2012.
INDIGENISATION AND OTHER PENDING MATTERS IN ZIMBABWE
The Government of Zimbabwe is in the process of implementing an indigenisation policy wherein all domestic businesses are required to be 51% beneficially owned and controlled by indigenous Zimbabweans. New Dawn's Zimbabwe operating subsidiaries, Casmyn Mining Zimbabwe (Private) Limited, Falcon Gold Zimbabwe Limited ("Falgold") and Olympus Gold Mines Limited, are all currently non-indigenous under the indigenisation legislation and the related regulations.
New Dawn's Plan of Indigenisation was designed and structured to accomplish compliance with the requirement for 51% ownership by indigenous Zimbabweans, while also taking into account the interests of other key stakeholder groups. The Company's initial Plan of Indigenisation was timely filed with the Zimbabwe Ministry of Youth Development, Indigenisation and Economic Empowerment (the "Ministry") in April 2011. Since then, the Company has been in confidential discussions and meetings with the Ministry and the National Indigenisation and Economic Empowerment Board ("NIEEB") addressing the components of the Company's Plan of Indigenisation and its proposed participants. These discussions have resulted in certain changes to the Company's Plan of Indigenisation and the signing, in September 2011, of a memorandum of understanding that provided the structure for the on-going discussions.
As a result of a meeting in July 2012, the Company submitted a further amended Plan of Indigenisation to NIEEB that included the participation of the National Indigenisation and Economic Empowerment Fund ("NIEEF"). Following a request from NIEEB for further details, the Company expanded on the proposal in a mid-September 2012 submission. The Company's Plan of Indigenisation, as modified, including the participation by NIEEF through an equity instrument, is still under consideration. The Company is working to facilitate the finalisation and implementation of its Plan of Indigenisation.
New Dawn's Plan of Indigenisation consists of two key components. The first component contemplates independent indigenous investor groups in Zimbabwe acquiring equity interests in New Dawn, which would include the participation of NIEEF. The second component provides for the transfer of equity interests in each of the Company's operating subsidiaries in Zimbabwe to Community Share Ownership Trusts and Employee Share Ownership Schemes amounting to 10% and 5%, respectively. The equity interests in the Company's Zimbabwe operating subsidiaries to be transferred to these entities are expected to provide a direct and broad-based participation in New Dawn's Zimbabwe mining operations by indigenous Zimbabweans. To take account of this dilution of New Dawn's interests in its Zimbabwe subsidiaries and to meet the additional effective 36% equity ownership of those subsidiaries by indigenous Zimbabweans through investment in New Dawn, the equity interest of New Dawn that would ultimately be acquired by indigenous investor groups and NIEEF would comprise approximately 42%.
The Company has commenced the initial implementation process with respect to its Plan of Indigenisation, which includes the signing of non-binding term sheets with several indigenous investor groups that are intended to provide the requisite indigenous element at the New Dawn level. The Company has also engaged with NIEEB with regard to an equity participation by NIEEF at the New Dawn level through a stock option instrument.
In order to enable the transfer of these equity interests, each Zimbabwe subsidiary must be wholly owned by New Dawn. As New Dawn currently holds 84.7%, of the equity of Falgold, the Company is in the process of attempting to acquire the balance of the shares of Falgold from the non-controlling interests. The acquisition process has proceeded via a Scheme of Arrangement under the Companies Act of Zimbabwe and, as of December 31, 2012, both the minority interests of Falgold and the High Court in Zimbabwe (the "Court") had approved the Scheme of Arrangement. The final significant condition precedent to completing the Scheme of Arrangement is approval of the Company's Plan of Indigenisation by the Government of Zimbabwe.
The offer presented to and accepted by the non-controlling shareholders of Falgold and the Court was US$0.20 cash for each Falgold share held or, with a specified election by the shareholder, the exchange of one New Dawn common share for every five Falgold shares held. A maximum of 2,899,888 common shares of New Dawn are issuable in respect of this transaction, but such number may be significantly less, depending on how many shareholders elect to receive cash rather than common shares of New Dawn. The Toronto Stock Exchange has approved the listing of such common shares of New Dawn, subject to certain conditions and the transaction closing by March 24, 2013.
New Dawn operates in Zimbabwe through three subsidiaries, and these subsidiaries currently operate five mines in different communities throughout Zimbabwe. Accordingly, because of this configuration, it is not currently legally feasible for a community around a specific mine site to be issued shares in a subsidiary. In order to resolve this issue, the Company has made application to governmental authorities in Zimbabwe to address certain tax, securities and regulatory matters so that it can reorganize its mining assets in Zimbabwe to facilitate implementation of its Plan of Indigenisation. This reorganisation would result in the mines in a specific geographic area being legally owned by only one subsidiary, which would allow for the 10% shareholding in such subsidiary to be allocated to the local Community Share Ownership Trust. This reorganisation would be implemented once the Scheme of Arrangement has been completed.
Due to various multi-jurisdictional legal, securities, tax and regulatory issues, the Company expects that the implementation of its Plan of Indigenisation, once approved, may take several months or more to accomplish. However, as there still continues to be substantial uncertainty surrounding the implementation of the indigenisation policy in Zimbabwe, there can be no assurances that the Company will be successful in its efforts to comply with the indigenisation laws and regulations under commercially viable terms and conditions, or at all. The Company is currently unable to predict the effect of an inability to conclude or implement a Plan of Indigenisation under terms acceptable to all stakeholders.
ABOUT NEW DAWN
New Dawn is a junior gold company listed on the Toronto Stock Exchange that is focused on developing its gold mining assets and operations in Zimbabwe. New Dawn owns 100% of the Turk and Angelus, Old Nic and Camperdown Mines. In addition, through its Falcon Gold Zimbabwe Limited subsidiary, New Dawn currently owns 84.7% of the Dalny, Golden Quarry and Venice Mines, and a portfolio of prospective exploration acreage in Zimbabwe. With the exception of the Venice Mine, all of these mines are currently operational, and they are geographically divided into three major gold camps.
The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or the accuracy of this release.
Special Note Regarding Forward-Looking Statements: Certain statements included or incorporated by reference in this news release, including information as to the future financial or operating performance of the Company, its subsidiaries and its projects, constitute forward-looking statements. The words "believe," "expect," "anticipate," "contemplate," "target," "plan," "intends," "continue," "budget," "estimate," "may," "schedule" and similar expressions identify forward-looking statements. Forward-looking statements include, among other things, statements regarding targets, estimates and assumptions in respect of gold production and prices, operating costs, results and capital expenditures, mineral reserves and mineral resources and anticipated grades and recovery rates. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors could cause the Company's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company. Such factors include, among others, risks relating to reserve and resource estimates, gold prices, exploration, development and operating risks, political and foreign risk, uninsurable risks, competition, limited mining operations, production risks, environmental regulation and liability, government regulation, currency fluctuations, recent losses and write-downs and dependence on key employees. See "Risk Factors" in the Company's Management's Discussion and Analysis - 2012. Due to risks and uncertainties, including the risks and uncertainties identified above, actual events may differ materially from current expectations. Investors are cautioned that forward-looking statements are not guarantees of future performance and, accordingly, investors are cautioned not to put undue reliance on forward-looking statements due to the inherent uncertainty therein. Forward-looking statements are made as of the date of this press release and the Company disclaims any intent or obligation to update publicly such forward-looking statements, whether as a result of new information, future events or results or otherwise.
SOURCE: New Dawn Mining Corp.
Investor Relations Contact: Richard Buzbuzian +1 416.585.7890
Visit New Dawn on the internet: www.newdawnmining.com
E-mail New Dawn at: [email protected]
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