Caledonia Mining Corporation PLC (LON:CMCL) told investors it achieved a new production record at the Blanket mine in Zimbabwe where it unearthed 56,133 ounces of gold during 2017, some 11.5% more than in the preceding year.
The company, in financial results for the year, reported an average gold price of US$1,243 per ounce (up from US$1,232 in the year before) and it said gross profit amounted to US$26.32mln, up from US$23.49mln.
Net profit was reported at US$9.38mln, with adjusted earnings per share confirmed at 135.4p per share for the 12 months ended December 31.
At the end of the year, Caledonia had US$12.75mln of cash and equivalents, having generated some US$24.5mln in the 12 months.
"I'm delighted to report that production for the year was a new record: the 56,133 ounces of gold produced in 2017 being 11.5 per cent higher than in 2016,” said Steve Curtis, Caledonia chief executive.
“The production difficulties which we encountered in the first half of the year were identified and addressed and it was pleasing to see that these remedial measures resulted in Blanket achieving consecutive production records in the third and fourth quarters of the year.”
"In addition to increased production, we have also reduced our unit costs: Caledonia's AISC per ounce for the year was $847 per ounce - seven per cent lower than in 2016. The combination of increased production and lower costs and a small increase in the gold price resulted in a 14 per cent increase in profit attributable to shareholders.”
Curtis added: “There were some significant political developments in Zimbabwe towards the end of 2017 which culminated in the appointment of the new President.
“The new President has made several pronouncements regarding a relaxation in the indigenisation policy and specifically the removal of the indigenisation requirement for gold mining companies.”
He highlighted that the company now intended to proceed with a funding process to raise US$4mln which will fund exploration and it will, assuming indigenous investors don’t acquire new shares, see the company’s stake in Blanket increase above 50%.
Options on indigenous stakeholders
The company is also said to be considering options to acquire stakes from certain indigenous stakeholders, to further increase its direct ownership of the mine.
"I wholeheartedly welcome the change in legislation which means that Caledonia can commit new capital so that Blanket can commence exploration and evaluations of additional projects in Zimbabwe,” Curtis said.
“If this investment is successful it will benefit all stakeholders, including Blanket's indigenous shareholders, future employees on the new projects, the communities around the new projects and the government of Zimbabwe which would benefit from increased royalty and tax receipts and greater inflows of foreign exchange arising from increased gold production.”
Caledonia is described, by Curtis, as being ‘highly cash generative” at present levels (55,000 ounces per year) and he is confident that this will improve further as the Blanket operation is expanded up to a rate of 80,000 ounces per year by 2021.
“Once the Investment Plan is completed towards the end of 2020, we expect to have substantial free cash flows to deploy elsewhere. Against this background, there are very encouraging political developments in Zimbabwe which we are optimistic will create new investment opportunities,” Curtis added.
In afternoon trading, Caledonia Mining shares were 0.5% higher at 512.5p.
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