New Dawn In Zimbabwe

New Dawn Mining (ND-T) plans to take its 100%-owned Turk gold mine in Zimbabwe out of care and maintenance and put it back into production, says the company’s president and CEO, Ian Saunders.

The decision came after the Reserve Bank of Zimbabwe changed its monetary policy in late January, allowing gold producers to market and sell their gold directly to customers overseas rather than to Zimbabwe’s Central Bank.

Under the new rules, gold producers will also be allowed to retain 92.5% of their gold sales in foreign exchange and any transaction under US$5 million will no longer need the approval of the Central Bank.

Prior to the rule changes, gold-mining companies had to receive payment for 15% of their gold in Zimbabwean currency and the U. S. dollar price (the official exchange rate on the day of delivery) and the remaining 85% could be retained by producers in U. S. dollars to pay for essential imports.

“There’s now an incentive to producing,” said Saunders in an interview in Toronto in March at the Prospectors and Developers Association of Canada convention. “They released the foreign-exchange controls far more than we thought they would.”

Once the changes to the monetary and fiscal regime are in place, the company says it anticipates “moving into a full mining mode and will provide a further update at the appropriate time.”

Turk is currently on active development. “As soon as we receive confirmation that the procedures are in place to market and get paid for our gold outside of the Reserve Bank of Zimbabwe and we test such, we will move into a ‘full production’ mode,” Saunders explained.

“When we do this, we will merely assign about 50 per cent of the current operating teams from development to stoping and thus boost the amount of ore broken per jackhammer from about 100 tonnes per month to 550 tonnes per month per jackhammer. From that point, we will focus on getting back to our last steady state production,” about 13,500 to 14,000 oz. gold per year, Saunders said. He added that would probably take about three to six months with the addition of some new employees and an extension to the work program.

In the three years to September 2007, the Turk mine produced about 400 kg of gold per year.

For the years 2006 and 2007, production from underground operations averaged about 1,100 oz. gold per month, or 13,200 oz. gold per year, at an average adjusted cash cost of less than US$380 per oz.

The Turk mine is 55 km north of Bulawayo, the second-largest city in Zimbabwe.

Saunders said he looked forward to full operations and the return to generating free cash flows.

Between October 2007 and September 2008, production from Turk was about 25% lower due to power cuts, labour shortages, and nonpayment of gold proceeds by the Reserve Bank of Zimbabwe.

For most of last year, the mine produced gold profitably — despite the fiscal and monetary regime in Zimbabwe and in particular, the regulated and ever-changing multiple currency exchange rate system and the resultant thriving parallel market.

New Dawn finally put Turk on care and maintenance in early October because it had still not been paid for gold it had deposited with the Reserve Bank of Zimbabwe.

Political uncertainty, financial mismanagement, and the multiplicity of exchange rates continue to hinder the formal gold-mining sector in Zimbabwe. Most of the major gold producers in the country shut down their operations be-fore New Dawn finally closed Turk.

By the end of July 2008, inflation had soared to over 230 million per cent a year. Over the last year, the political climate has been dominated by a stalemate in forming a government of national unity. The stalemate occurred after the loss of the ruling ZANU-PF party to the primary opposition party and others in parliamentary elections held in March 2008. A power-sharing agreement was finally struck in February 2009.

Saunders remains optimistic about Zimbabwe and the future of mining in the country, and argues that 98% of what one reads in the popular press about Zimbabwe is untrue.

“It has always been a reasonable place to live,” said Saunders, who was born and raised in the country. “We’ve got a very good asset base. We’ve been there for twelve years. We’ve seen political, fiscal and monetary changes and when you put all of that together, there are very few investment destinations that offer such growth.”

According to a recent technical report on the Turk mine, at the recent production rate of 11,000 tonnes per month, the mine has a life of 11 years in reserves and 37 years with the inclusion of indicated resources.

At the proposed production rate of 20,000 tonnes per month, the mine life is 5.2 years of reserves and 20.5 years with the inclusion of indicated resources. If inferred resources are included, the mine life rises to 29 years.

Turk has a measured and indicated resource of 4.69 million tonnes grading 4.98 grams gold per tonne for total contained metal of 756,600 oz. gold. In addition, inferred resources stand at 1.99 million tonnes grading 5.16 grams gold for 331,700 contained ounces.

Ore from both the Turk mine and New Dawn’s nearby Angelus mine will be treated in a central plant, with a production facility currently capable of processing up to 400 tonnes per day or 12,000 tonnes per month. The Angelus mine, currently in development, has produced gold in the past but is currently being explored underground to assess its full potential.

Angelus has an indicated resource of 220,000 tonnes grading 6.1 grams gold per tonne for total contained metal of 43,200 oz. gold. Its inferred resource totals 84,000 tonnes grading 5.91 grams gold for total metal of 15,900 oz. gold.

The Turk and Angelus mines are hosted by a large northeasterly striking shear zone, which dips steeply to the south within a typical Archean greenstone succession of metasedimentary and metavolcanic rocks.

Gold mineralization occurs in a multiple shear system within this zone with six major mineralized shears and a number of splays, which strike over at least 800 metres, persist to beyond a depth of 800 metres and dip steeply to the south-southeast.

Outside Zimbabwe, New Dawn also owns a 74% stake in the Blue Dot property in South Africa. A production decision is anticipated in mid-2009.

Underground and surface infrastructure for mining and processing is in place and stope development is under way. Blue Dot has a production facility rated at 180 tonnes per day or 5,500 tonnes per month.

Situated in the Amalia greenstone belt, Blue Dot has indicated resources of 35,230 tonnes grading 2.9 grams gold for 3,300 oz. gold and an inferred resource of 65,900 tonnes grading 3.9 grams gold for 8,270 oz. gold.

For the fiscal year ended Sept. 30, 2008, New Dawn produced 8,650 oz. of gold and generated US$7.48 million in gold sales.

The company is 100% unhedged, with cash and equivalents of US$3.94 million, and working capital of US$4.97 million as at Dec. 31, 2008; it has no unfunded capital commitments for 2009 and no long-term debt.

At presstime, New Dawn was trading at 54¢ per share. The junior gold company has a 52-week trading range of 5¢-$2 per share and 29 million shares outstanding.