New Dawn Mining looks to increase gold production, cut costs after Central African Gold acquisition

Zimbabwe operating gold miner Central African Gold (LON:CAN) took note of the third quarter report released by its 88.6% owner New Dawn Mining Corp (TSX:ND), which was now targeting 50,000 to 60,000 oz (ounces) of consolidated annualized gold production within 18 to 24 months following the acquisition of CAG. New Dawn said it was taking care of the issues that negatively impacted production and is set to achieve improvements in both production and costs after buying CAG.

Shares in CAG were up more than 15% in midmorning London deals on the news.

During the quarter to 30 June, revenues from sales from New Dawn’s Turk mine amounted to US$3.55 million compared to US$3.8 million a year ago as production dipped from 3,395 oz to 3,243 oz during the period with the quantity of gold sold down from 3,427 oz to 2,974 oz. Cash costs per ounce rose from US$653 to US$747. Following the decline in revenues and due to higher costs, EBITDA (earnings before interest, taxes, depreciation and amortisation) decreased from US$1 million to US$380,702.

Cash reserves increased from US$4.53 million at 31 March to US$4.95 million.

The decline in production was due to statutory holidays in April, a five day strike in May, major repairs to equipment and power cuts during the quarter, all of which had been flagged by the company.

Steps to remove impediments to production have already been taken with the installation of diesel generators at the mine to stabilize the power situation is expected in September. The generators are expected to provide electrical capacity sufficient for New Dawn to reach and maintain its next production target at the Turk Mine of an annualized 22,000 to 23,000 oz.

The power supply issues also were the main factor behind the increase in cash costs. With the anticipated increase in production following the CAG acquisition, costs are expected to fall to what the company called “historical normalized levels” that previously stood at around US$600/oz.

At the quarter end, an additional 836 ounces or 26 kg's of gold awaited export documentation for sale in South Africa, and were included in July 2010 sales.

New Dawn acquired the controlling stake in CAG in June 2010 through deals with the company’s three largest shareholders - Emerging Capital Partners (50.02%), HBD Zim Investments Ltd (28.18%) and Investec Asset Management (10.48%). New Dawn said that the investment represents a substantial increase in its gold mining business, as well as a focus on, and commitment to, the Zimbabwe gold mining industry.

New Dawn is a Zimbabwe-focused junior gold company, which is currently expanding production at its Turk and Angelus mines. The company’s objective is to become a mid-tier gold producer, and 'in-country consolidator' of gold mining assets in Zimbabwe, and it sees the investment as a major step towards realizing this objective.

CAG, through its subsidiary, has interests in two separate Zimbabwe-operating gold mining companies. It owns an 84.7% interest in a Zimbabwe Stock Exchange listed  Falcon Gold Zimbabwe (ZIM:FALGOLD) (Falgold),  and the entire share capital of a private Zimbabwe company  Olympus Gold Mines Ltd.

Through these holdings, CAG has interests in several gold mining properties in Zimbabwe, the most significant properties being: the The Dalny Mine (Falgold); The Golden Quarry Mine (Falgold); The Venice Mine (Falgold); The Camperdown Mine (Olympus); and the The Old Nic Mine (Olympus).

http://www.proactiveinvestors.co.uk/companies/news/20144/new-dawn-mining-looks-to-increase-gold-production-cut-costs-after-central-african-gold-acquisition-20144.html