Drought kills Cluff dividend

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WEAK gold prices and heavy write-downs in the value of Spanish assets pushed Cluff Resources, the mining group, into pre-tax loss of pounds 225,000 last year, compared with a pounds 2.25m profit in 1991.

The result has forced the company to pass the 1p dividend which, after taking advanced corporation tax into account, would have cost it about pounds 1m.

Much of the blame for last year's losses has been put on Cluff's mining operations in Zimbabwe. Crippling interest rates and power shortages due to drought in the region prevented the business from generating sufficient cash to send back home. Despite the problems, Cluff's Zimbabwe mines boosted gold prodution by 7 per cent to 72,230 ounces.

The company said that conditions had now improved - it has begun to receive a dividend from Zimbabwe, and rains have also arrived, easing the power shortage.

In addition, Cluff is in talks with the country's central bank to receive new loans that would cut its high interest costs. These jumped from pounds 426,000 to pounds 631,000 at the group level last year.

Exploration cost write-offs rose from pounds 172,000 to pounds 1.1m last year as the group stepped up assessment of the potential of its African mines. The spending helped to boost the total underground reserves of its Freda Rebeca gold mine by 34 per cent to 614,000 ounces.

But the low gold price has forced Cluff into a complete write-down of its Spanish mines at an exceptional cost of pounds 1.64m. The mine has limited ore reserves, but is expensive to operate.

The loss per share amounted to 2.38p against earnings of 1.37p in the previous year. Cluff shares fell 1p on the news to 11.5p.