eBusiness Weekly
Michelle Gwizi
Aim – listed mining group, Caledonia Mining Corporation, says its earnings per share could decline by approximately US$ 5,4 million after the Reserve Bank of Zimbabwe (RBZ) withdrew the export credit incentive scheme for gold producers.
The export incentive was introduced by the apex bank in 2016 under the bond note facility to encourage businesses to increase exports.
However, in his 2019 Monetary Policy Statement, RBZ Governor Dr John Mangudya, announced the removal of the export incentives. He said going forward the monetary authority was permitting inter – bank trading of currency held in the local banking system known as RTGS dollars and currency held in foreign currency accounts (FCA), which is capable of being used for payments outside Zimbabwe.
Caledonia’s concerns
Responding to the matter, Caledonia said the policy shift by the central bank would negatively affect the company’s earnings per share, which if calculated on international financial reporting standards (IFRS), would decrease by $0, 40 to $0, 46.
“Caledonia Mining Corporation Plc (“Caledonia” or the “Company”) announces that following the announcement of a revised monetary policy by the Reserve Bank of Zimbabwe, the export credit incentive programme for Zimbabwean gold producers will be withdrawn, it is estimated this will reduce Caledonia’s earnings per share (calculated on an IFRS basis) for 2019 and thereafter by approximately US$ 5,4 million or 40 to 46 United States cents per,” Caledonia said.
The export incentive facility
The RBZ had operated an export incentive programme in terms of which Zimbabwean gold producers received a premium to the international gold price. The premium was initially at a level of 2, 5 percent of gold revenues, which was subsequently increased to 10 percent and more.
“At this stage it is unclear whether this policy will address increasing inflationary pressure in Zimbabwe by creating a transparent and efficient market exchange rate between RTGS dollars and dollars held in FCAs,” Caledonia said.
“The effect on Caledonia’s earnings per share for 2019 is calculated assuming a gold price of $1,300 for the remainder of the year, that Blanket (mine) achieves the production guidance for 2019 as announced on January 14, 2019 of between 53,000 and 56,000 ounces of gold and that there are no changes in Blanket’s operating costs.”
The miner said the export incentive revenues were received into the company’s RTGS bank account and were not eligible for remittance outside Zimbabwe with a specific allocation of foreign exchange by the RBZ.
Blanket Mine is Caledonia’s local operation located in Matabeleland South, Gwanda. Last year Blanket Mine produced 54 512 ounces of gold in line with the miner’s projected annual target, which ranged between 54 000 and 56 000 ounces. Government has declared mining and agriculture as key deliverables to spearhead the country’s economic revival in line with Vision 2030 aimed at turning Zimbabwe into a middle income economy.
Facts about Blanket Mine
Caledonia acquired the Blanket Mine from Kinross Gold Corporation with effect from April 2006. Following the implementation of indigenisation with effect from September 5, 2012, Caledonia now owns 49 percent of Blanket.
Blanket Gold Mine is a well-established Zimbabwean gold mine, which operates at a depth of approximately 750 meters below surface and produced approximately 45,500 ounces of gold in 2013.
Blanket Mine also holds brownfield exploration and development projects both on the existing mine area and on its satellite properties which are within trucking distance of the Blanket metallurgical recovery plant.
In November 2014, Caledonia announced a revised investment plan for the Blanket Mine in terms of which production is expected to increase to approximately 80,000 ounces of gold by 2021 following the investment of approximately US$70million, all of which is expected to be funded from internal cash generation and existing cash resources.
The Blanket Mine is located in the south-west of Zimbabwe approximately 15 km west of Gwanda, the provincial capital of Matabeleland South.
Gwanda is 150 km south east of Bulawayo the country’s second largest city and 196 km northwest of the Beitbridge Border post with South Africa, and 560 km from Harare, Zimbabwe’s capital city.
Access to the mine is by an all-weather tarred road from Gwanda, which is linked from Beitbridge to Bulawayo and Harare by a national highway.
