African Gold has said the fall in world gold prices over the last year has had a "devastating" effect on the company.

Africa Gold operates two gold mines in Zimbabwe - the Inez and the Beehive - and says plans drawn up two years ago assumed a gold price of $350 (£236) an ounce, but this has fallen to $280 an ounce. It says this fall has resulted in a profit shortfall of more than $600,000.

The company says it borrowed heavily in the past three years to invest in the mines. It adds that part of the funding for the second mine was to be cash flow for the first mine at Inez.

"The low gold price has all but eliminated the free cash flow from Inez," said a company statement.

It says inflation in Zimbabwe is running at more than 30 per cent and African Gold hopes the "political difficulties are only short term".