http://www.herald.co.zw/inside.aspx?sectid=14598&cat=8

CAG seeks partners to develop Zim assets

Business Reporter

CENTRAL African Golds board is engaged in the identification of strategic financiers and partners to further develop its Zimbabwean assets after shelving plans to dispose of them.

The companys chairperson and president, Mr Roy Pitchford, said the stated strategy of the board was to focus on the development of its Zimbabwean assets.

"To that end, the board continues to be actively engaged in the identification of suitable sources of finance and/or partners with which to develop further the Zimbabwe assets, to the benefit of all shareholders

"And also that the company is not currently examining a disposal of the Zimbabwe assets," said Mr Pitchford.

The group operates Dalny Mine, Venice Mine, Golden Quarry Mine, Camperdown Mine Quarry and Old Nic Mine.

Mr Pitchford had issued a statement saying several options were being considered, including further debt financing, introduction of strategic partners, and the sale of the Falcon Group, to investors who would undertake to provide adequate funding to fully restore the mining operations of the company.

He added that CAG was to advise Falcon Gold on the future plans for the company during the first quarter of 2010.

"We look forward to resolving the future of the mines in a manner that ensures their continued operation and growth and thereby providing a secure and prosperous future to all staff and management," said Mr Pitchford in a statement in December.

The decision by the board to reverse the intended sale of local assets comes at a time when the group said it would probably reinvest US$5 million realised from the disposal of its mining assets in Mali into its Zimbabwean operations.

CAG also secured a US$1,2 million loan to capitalise its Zimbabwean mines.

Recent reforms by the Government had given the group confidence to restart gold production, exploration and development programmes.

"Subject to financing, we anticipate bringing Golden Quarry and Camperdown into production during 2010, before developing various other target properties," Mr Pitchford said.

The group, in its annual report, said the boards experience remains that Zimbabwe is still a challenging environment in which to operate with ongoing and anticipated electricity shortages, a limited supply of skilled labour and very rundown plant and equipment.

However, it added that once the initial production levels were achieved, plans would have to be put in place not only to update the plant, but also to increase gold production to better reflect the potential of the extensive gold deposits owned by the company.

"After a turbulent start to the year, we are now focused on advancing our assets in Zimbabwe, which we believe offer excellent mid to longer-term prospects.

"The political situation in Zimbabwe remains challenging. However, we believe we are seeing the first green shoots of recovery," added Mr Pitchford.

He said substitution of the Zimbabwean dollar with the United States dollar and other hard currencies had vanquished hyperinflation and this and the recent World Bank grant all pointed to an improvement in operational conditions.

"With this in mind, our immediate aim is to move into a cash-positive position and then expand production at our Zimbabwean mines," said Mr Pitchford.

The group would look at the wider portfolio of existing assets with a view to enhancing their value and take advantage of their first mover position in the country to acquire additional projects.

For the half year ended June 30 2009, the group produced 9,52kg of gold from 22 963 tonnes treated, a yield of 0,41 grams per tonne.

Falgold attributed the reduced production to slow build-up following the decision to place the mines on care and maintenance since December 2008.

Falcon Gold posted a loss of nearly US$2 million in the year ended June 2009.

The company said the loss was a result of low production in the period after closing some mines over viability.

Dalny Mine treated 22 963 tonnes of ore during the period producing 9,52kg of gold while Venice Mine remains on care and maintenance with initial exploration going on.

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