Higher operating costs along with a substantial drop in gold prices led to the halving of African Gold's interim profits from £141,000 to £77,000 in the six months to September 30th, 1997. The latest results did not have the benefit of its new Beehive gold mines in Zimbabwe which commenced operations in September; it has the capacity of processing 200 tons of ore per day.

Chairman, Dr John Teeling described the developments in its Zimbabwe operations as "significant". Despite the fall in gold prices, from a high of $370 an ounce in January to a low of $285 in December, gold production at the Inez Mine in Zimbabwe rose by 50 per cent from 2,200 ounces to 3,300 ounces in the first half. The 200 tons a day mill at the Inez mine continues to process surface sands and tailings while the smaller 45 ton a day mill treats higher grade underground ore. "Gold production is slowly but steadily increasing," according to Dr Teeling, and "underground development is continuing". The first gold at the Beehive plant was poured in September. Since October, some higher grade underground ore from Babs has been processed.

The latest African Gold results show a marginal rise in turnover from £533,000 to £544,000.

In September, African Gold raised $1.6 million through the issue of secured two-year, 9 per cent loan notes with attached share warrants. The proceeds were used to facilitate "timely payment to contractors and creditors and to fund working capital", the group said. Cash amounted to £700,000 at the end of September.

On the future, African Gold said, despite the fall in the price of gold, the company is profitable. Gold output was expected to grow and "any recovery in the gold price will result in a very beneficial impact on profitability", Dr Teeling said.