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Caledonia Mining into ramp-up phase as central shaft excavation completes

Snapshot

Rising expected cash generation from 2020 expected

Caledonia Mining Corporation - Caledonia Mining into ramp-up phase as central shaft excavation completes

Quick facts: Caledonia Mining Corporation

Price: 565 GBX

AIM:CMCL
Market: AIM
Market Cap: £60.81 m
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  • Caledonia Mining operates the Blanket gold mine in Zimbabwe

  • New central shaft at the mine has been sunk

  • Target is 80,000oz per year by 2022

 

How is it doing

Blanket started production in 1904 and new shaft will take mining down to below the 1,200m level

For the quarter ended 30 June, production was 12,712 ounces of gold, 6.4% higher than the first quarter of the year, although production for the first half was 3.4% lower year-on-year.

Net profit attributable to shareholders increased by almost 800% to US$23.3mln compared to the comparable quarter due to the substantial devaluation of the newly introduced Zimbabwe currency.

Operating profit for the quarter before foreign exchange gains was just over US$6mln, 21% higher than the corresponding period a year earlier.

Production guidance for this year has been trimmed to 50,000-53,000oz due to grade issues but Caledonia Mining PLC (LON:CMCL) remains “on track” for its target of 80,000 ounces by 2022. 

In October, Caledonia reported production of 13,646 ounces in the third quarter.

The quarterly production figure marks a 7.3% increase on the 12,712 ounces produced in the preceding three-month period, but, was 3.2% lower than the same three months of 2018.

AIM-quoted Caledonia told investors it maintains guidance to produce some 50,000 to 53,000 ounces for the full year and remains on track to reach 80,000 ounces per year by 2022.

 

What the boss says: Steve Curtis, chief executive

Curtis said that the company is "certainly seeing" much improved tonnage and grades throughout August, September, and continuing into August.

"The remediation efforts we've been working on are really starting to bear fruit", said Curtis reflecting on Caledonia's rebound from a tough first half of the year which was fraught with "very severe electrical problems" across Zimbabwe.

In July Curtis also announced the completion of the shaft sinking at the Central Shaft, which he called a “major milestone" which "marks the successful culmination of five years’ work and approximately US$45 million of capital investment”.

Watch the interview:

 

Inflexion points

  • 45% production growth planned
  • Rising expected cash generation from 2020 expected
  • Strong future cash generation leaves resources available for strategic purposes: target-rich environment
  •  All-in Sustaining cost guidance of $810/oz – $850/oz
  • Operating costs to move down as new shaft ramps up: due to increased production volume, economies of scale and better mine efficiencies
  • One of the highest yields in the gold industry
  • Management anticipates maintaining the current dividend through any future capital investment requirement
  • Higher planned production & lower costs could support continued increases in dividends

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Full interview: Caledonia Mining on track to hit full year guidance as...

Caledonia Mining Corporation Plc's (LON:CMCL) Steve Curtis speaks to Proactive London's Andrew Scott following the release of their third-quarter production numbers for the Blanket Mine, in Zimbabwe. The quarterly production figure, 13,646 ounces, marks a 7.3% increase on the 12,712 ounces...

3 days, 16 hours ago

3 min read