Zimbabwe Stock Exchange-listed gold miner, Falcon Gold, is in a recapitalisation drive following losses and costs incurred in the half-year period and the need to bring Golden Quarry Mine into operation.
The capital raise proposition was notified through a cautionary statement released by the company management yesterday.
Reads the statement: “The directors of Falcon Gold Zimbabwe Limited wish to advise its shareholders and members of the public that the company is currently contemplating a capital raise, which if successfully concluded, may have an effect on the price of the company’s shares.
“The directors therefore advise the shareholders of Falcon Gold Zimbabwe Limited, and the public to exercise caution and to consult their professional advisors when dealing in the shares of the company.”
Management earlier indicated in the half year results to March 31, 2019, that it seeks to raise funds within the range of US$2,5 million and US$3 million to repair plant and machinery and in the aftermath commence operations at the Golden Quarry Mine.
“The board and management, with the assistance of the majority shareholders, are exploring options for additional US$2,5 million — US$3 million of funding to enable repair of the mill and resuscitation of mining operations but have not finalised the funding structure,” reads the statement accompanying the forgone half-year financials.
In 2018 Falcon Gold had reported catastrophic engineering failure at Golden Quarry Mine’s main operating mill.
The failure had affected “production and cash flows.” Since then, operations had reportedly been halted with the management weighing options either to refurbish or completely replace the mill, which solutions called for adequate capital.
Owing to halted operations and power outages that compounded the problem, loses ensued into the 2019 half-year period with the miner recording an upsurge in net working capital deficit to $11,3 million from $6,7 million in September 2018.
A negative equity was recorded of $44,4 million compared to a 2018 comparative of $17,2 million.
Given the scope of work to be funded, the capital raise initiative seems to be an inevitable exercise despite the holding company, New Dawn Mining Corporation, having reportedly extended the grace period for repayment of loans to 2020.