All that glitters is gold at Caledonia

20 Nov, 2020 - 00:11 0 Views
All that glitters is gold at Caledonia Caledonia’s Blanket gold mine

eBusiness Weekly

Business Writer

Profitable cash generative gold producer, Caledonia Mining, says production for the nine months to September 2020 was very strong with the miner producing 43 000 ounces for the period under review.

This is 12 percent higher than the 38 306 ounces produced for the comparative prior year.

Caledonia’s chief finance officer Mark Leamonth said the miner, which counts Zimbabwe based Blanket Mine as its primary asset, had thus decided to increase production guidelines from a range of 53 000 to 56 000 ounces to a range of 55 000 to 58 000 ounces.

Leamonth said Covid-19 had no effect on the miner’s operations which were growing from strength to strength.

In an interview with United Kingdom based platform, Directors Talk, Leamonth said revenues were up strongly by about US$5 million. Gross revenues amounted to US$25,4 million, a 27 percent increase on the US$20 million achieved in the third quarter of 2019.

“That (revenue) excludes the 2 000 ounces of gold which have sitting in the safe waiting for delivery on the first of October,” Leamonth said.

Gross profit recorded solid gains to US$12,5 million a 47 percent increase on the $8,5 million in Q3 2019 at a gross margin of 49 percent (Q3 2019, 43 percent).

This saw adjusted earnings per share more than doubling to over US34 cents on the 3rd quarter from US16 cents prior year comparative.

Leamonth said cash generation has increased during the period under review. The miner ended the 3rd quarter with net cash and cash equivalents of US$21,6 million. The period had, however, witnessed an increase in cost per ounce with Leamonth saying the increase was a result of costs associated with dealing with the coronavirus pandemic as well as running generators more often than usual. 

Costs per ounce increased to US$758 during the 3rd quarter from US$686 an ounce in 2019. Of the increased costs, US$73 per ounce of costs related to Covid-19, a non-cash charge in respect of share-based payments and the cost of increased usage of the diesel generators.  

That reflected a US$1 million extra costs at the mine. Half of that amount related to Covid-19 and the increased use of generators for alternative power.

He said while nothing could be done about the effects of Covid-19, the increased reliance on generators was reflective of power challenges in Zimbabwe.

Caledonia has since embarked on a solar power project which will reduce reliance on the national grid.

The other half related to incentives given to management and heads of departments at the mine.

Costs per ounce went up sharply to US$170 from US$100 as a result of increased royalties as the gold price went up.

There was a “massive increase” in directors’ and officers’ insurance premiums which increased from US$70 000 a year to nearly a US$1 million.”

The all-in sustaining cost per ounce increased from US$872 in Q3 2019 to US$1,119 due to a higher insurance premium and an increased share-based payment expense.  

Despite the increased costs, Caledonia still maintains its cost guidance for 2020 of between $693 and $767 per ounce for on-mine costs and between $951 and $1 033 per ounce for all-in sustaining costs.  

On the central shaft, Leamonth said the restrictions brought about by Covid-19 had caused delays towards its completion.

“The central shaft is about 12 weeks behind schedule as should have been completed towards the end of October but will now be completed towards the end of December,” Leamonth said.

Commissioning will be done in the first quarter of next year then production can be ramped up. Leamonth said for 2021 production is now forecast to be around 61-67 000 ounces down from the previous projection of about 75 000 ounces.

From 2022 onwards, production is expected to get to 80 000 ounces.

Leamonth said as the performance of the business improves, the company will also share the profits by increasing dividends for shareholders. The July dividend was increased by 13,3 percent to 8,5 cents per share and the October dividend was further increased to 10 cents per share following the continued strong financial and operating performance. The cumulative increase in the dividend per share since January 2020 is 45 percent. The next dividend announcement will be on the second of January 2021. Shareholders can also expect progressive quarterly production increases throughout 2021.

Caledonia expects to embark on new opportunities in Zimbabwe.

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