African Gold has scaled down its operations in Zimbabwe because of low gold prices and worsening economic conditions in the country.

In an interim statement issued yesterday African Gold reported operating losses of £141,000 for the six months ended September 30th, compared to profits of £77,000 for the same period in 1997. Turnover was down from over £544,000 to £494,000.

Because of the financial situation, the company has closed its Beehive mine and put two others - Babs and Antelope - on "care and maintenance" - which means no ore is being produced.

The company's shares, quoted on London's Alternative Investment Market, dropped from 3.5p sterling to 2p when the statement was issued yesterday.

The chairman of the company, Dr John Teeling, said with gold prices at about $285 an ounce, making money from a mine "is almost impossible for everyone".

"The low price results in a vicious circle of lower revenue producing less cash to invest in mine development leading in turn to lower production," he added.

The Zimbabwe economy is experiencing major problems at present with a collapsing currency, high interest rates and hyperinflation. Dr Teeling said this meant the company's assets had declined in value by £2 million.

Dr Teeling said he hoped full production could resume at Babs, Beehive and Antelope in a few months and he pointed out that other gold companies in the area were in a similar position.

In the meantime, Dr Teeling said the focus of the company would be on its fourth Zimbabwe mine, Inez.

He added that African Gold's current liabilities consist of more than £1 million in loan notes which are due in September.