Commenting on the results for the quarter and half year to June 30, 2016, Steve Curtis, Caledonia Mining PLC LON:CMCL President and Chief Executive Officer said: “The results for the second quarter represent a substantial improvement on previous quarters as we begin to see the benefits of the continued investment at Blanket and as a result of the improved gold price. Adjusted earnings per share in the second quarter were 144 per cent higher than quarter 1 of 2016 and over 300 per cent higher than in the second quarter of 2015. Caledonia remains confident of meeting market expectations for the remainder of 2016.
“A new production record was largely the result of improved underground logistics and increased mine flexibility as a result of the implementation of the Revised Investment Plan at Blanket Mine. This achievement is a testament to the hard work of the management and employees at Blanket Mine and the technical team at Caledonia over the last 18 months.
“Gold production in the quarter was 15.6 per cent higher than the first quarter of 2016 due to the increased tonnes mined and milled and the improved grade. The average feed grade in the quarter was 3.47 grammes per tonne compared to 3.16 grammes per tonne in quarter 1 and 3.25 grammes per tonne in 2015. The higher grade was as planned and reflects the commencement of production from the AR South and Blanket ore bodies below 750 meters. In future quarters I expect the grade will improve towards 4 grammes per tonne as production from higher grade, deeper ore bodies increases.
“Our increased confidence in the future financial performance of the group is reflected in the increase in Caledonia’s dividend. With effect from the end of July 2016,Caledonia’s dividend has increased by 22 per cent from 1.125 cents per quarter to 1.375 cents per quarter. Caledonia’s dividend remains sustainable with dividend cover for the quarter of over 4 times earnings and 10 times operating cash flow.
“Higher production results in a lower average cost per ounce as fixed costs are spread over more production ounces. The All-In Sustaining cost for the quarter was $936 per ounce – 9.5 per cent lower than the comparable quarter of 2015. Costs at Blanket and Caledonia remain well-controlled and I expect to see further reductions in the average cost per ounce as production increases in terms of the production plan.
“Improved profitability was also reflected in Caledonia’s improved cash position. At June 30, 2016 Caledonia had cash of $10.6 million and no debt, compared to net cash of $8.8 million at March 31, 2016. In early August 2016, Blanket re-commenced dividend payments after approximately 18 months during which dividends were suspended so that it could re-invest its operating cash flows in terms of the Revised Investment Plan. The resumption of dividend payments by Blanket will further enhance Caledonia’s cash position and also means Blanket’s indigenous shareholders will participate in Blanket’s improved financial performance.
“We have increased our focus on exploration and resource development which has resulted in regular resource updates. I am confident that the life of mine will be further supplemented by resource additions and upgrades.
“A huge amount has been achieved at the Central Shaft since work commenced in late 2014: the sinking head gear has been installed and commissioned and the main sinking phase has commenced. Completion of the Central Shaft remains on track for mid-2018 with the shaft depth currently standing at 170m. The completed shaft down to a level of 1,080m will establish Blanket as a large, low cost operation with excellent prospects to extend the existing mine life.
“2016 has been a transformational year for Caledonia and Blanket to date and I look forward to providing further updates to the market as the year progresses.”
Caledonia Mining Corporation Plc (“Caledonia” or the “Company”) announces its operating and financial results for the first half of 2016 (“H1” or the “Half Year”) and the second quarter of 2016 (“Q2” or the “Quarter”). All results are reported in United States dollars unless otherwise indicated. Following the implementation of indigenisation in September 2012, Caledonia owns 49% of the Blanket Mine in Zimbabwe. Caledonia continues to consolidate Blanket and the operational and the financial information set out below is on a 100% basis unless otherwise indicated.
Q2 Q2 H1 2015 H1 Comment
2015 2016 2016
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Higher gold production
due to increased tonnes
Gold produced mined and milled and
(oz) 10,401 12,510 20,360 23,332 higher grade
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Cost per ounce falls
as fixed costs are spread
On-mine cost across higher production
($/oz) 720 629 718 658 and sales ounces
------------------- ------- ------- -------- ------- -----------------------------
Lower cost per ounce
due to lower on-mine
cost per ounce, offset
All-in Sustaining by higher royalty cost
Cost ($/oz) due to the higher gold
("AISC") 1,030 936 1,007 943 price
------------------- ------- ------- -------- ------- -----------------------------
Average realised Higher realised price
gold price reflects the higher
($/oz) 1,173 1,252 1,186 1,211 prevailing gold price
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Higher gross profit
due to higher production
and sales, higher realised
Gross profit gold price and lower
($'000) 3,252 5,936 7,000 9,824 average costs per ounce
------------------- ------- ------- -------- ------- -----------------------------
Higher attributable
profit due to increased
Net profit gross profit and the
attributable profit arising on the
to shareholders sale of the treasury
($'000) 266 3,607 1,522 4,150 bills
------------------- ------- ------- -------- ------- -----------------------------
Adjusted basic Higher adjusted earnings
earnings per per share excludes the
share ("EPS") sale of the treasury
(cents) 1.5 6.1 4.1 8.6 bills and deferred tax
------------------- ------- ------- -------- ------- -----------------------------
Net cash increased in
the quarter, but is
Net cash and lower than June 30,
cash equivalents 2015 due to high levels
($'000) 19,170 10,581 19,170 10,581 of capital investment
------------------- ------- ------- -------- ------- -----------------------------
Increase in operating
Cash from cash flows reflects
operating the higher sales volumes
activities and gold price and lower
($'000) 1,853 7,215 3,186 8,964 average costs of production
------------------- ------- ------- -------- ------- -----------------------------
Strategy and Outlook
Caledonia’s strategic focus continues to be the implementation of the Revised Investment Plan at Blanket, which was announced in November 2014 and is expected to extend the life of mine by providing access to deeper levels for production and further exploration. Implementation of the Revised Investment Plan remains on target in terms of timing and cost. Caledonia’s board and management believe the successful implementation of the Revised Investment Plan is in the best interests of all stakeholders because it is expected to result in increased production, reduced operating costs and greater flexibility to undertake further exploration and development, thereby safeguarding and enhancing Blanket’s long term future. Caledonia’s cash position is expected to improve as a result of the implementation of the Revised Investment Plan; Caledonia will continue to assess new opportunities to invest surplus cash.
Dividend Policy
On November 25, 2013 Caledonia announced a dividend policy in terms of which it paid a dividend of 6 Canadian cents per share in 2014, split into 4 equal quarterly payments of 1.5 Canadian cents per share. The first quarterly dividend was paid on January 31, 2014 and subsequent quarterly dividends were paid thereafter.
Following the announcement on December 16, 2015 that henceforth Caledonia will report its financial results in United States Dollars, the quarterly dividends that were paid at the end of January and April 2016 were declared and denominated in United States Dollars as 1.125 United States cents.
On July 5, 2016 Caledonia announced a quarterly dividend of 1.375 United States cents per share, or 5.5 United States cents per annum. The increased dividend represents Caledonia’s revised dividend policy following the success of the revised mine plan. It is currently envisaged that the dividend of 5.5 United States cents per annum will be maintained.
Hedging
In February 2016, the Company entered into a derivative contract in respect of 15,000 ounces of gold over a period of 6 months and accordingly, the contract expired in July 2016. The contract protected the Company if the gold price fell below $1,050 per ounce but gave Caledonia full participation if the price of gold exceeded $1,079 per ounce. The derivative contract was entered into by the Company for economic hedging purposes and not as a speculative investment.
The derivative financial liability was measured at fair value and resulted in an expense of $435,000 (being the maximum economic exposure arising from the contract) which was included in profit or loss for Q1 2016. Of the $435,000 expense recognised in Q1 2016, $145,000 was realised as at March 31, 2016 and $236,000 was realised in Q2 2016. The Company settled the expense with the $435,000 margin call deposited with the hedge counter-party. Blanket continues to sell all of its gold production to Fidelity Printers and Refiners Ltd (“Fidelity”), as required by Zimbabwean legislation, and receives the spot price of gold less an early settlement discount of 1.25%.
Exploration
There has been an increased focus on exploration and resource development at Blanket Mine for several quarters which is now beginning to bear fruit. As reported in the previous quarter, new drilling machines have been acquired and commissioned as a result of which the meters of diamond drilling has approximately doubled to 6,100 per quarter. On July 27, 2016 Caledonia announced that 343,000 tonnes of ore at a grade of 5.19g/t had been upgraded from inferred resource to indicated resource and 1.2 million tonnes of new inferred resource at a grade of 5.00g/t had also been added to inventory.
Director and Management Appointments
On July 26, 2016 Caledonia announced the appointment of John McGloin as an independent non-executive director and Maurice Mason as Vice President Investor Relations and Corporate Development.
In addition to his recent and relevant experience as an executive in the mining industry, Mr McGloin’s appointment will support Caledonia’s increased focus on exploration and resource development and will enhance Caledonia’s access to institutional investors.
Mr Mason will take over the day-to-day responsibility for Investor Relations and Corporate Development from Mr Learmonth, who, since November 2014 had combined this role with that of Chief Financial Officer.
Sale of Treasury Bills
On May 16, 2016 the Company announced that Blanket Mine had sold treasury bills (“Bills”) issued by the Government of Zimbabwe for a gross value of approximately $3.2 million. The Bills were issued to Blanket in 2015 and replaced the Special Tradeable Gold Bonds (“Bonds”) which were issued to Blanket in 2009 as part consideration for gold sales that were made by Blanket in 2008 under the terms of the sales mechanism that existed at that time for Zimbabwean gold producers. The Bonds were fully written down in a previous accounting period, and the impairment value was applied as a deduction from Blanket’s taxable income. The gross sales proceeds are treated as income in the Quarter and the income was subject to Zimbabwean income tax at 25.75%. The net proceeds are deducted for the purposes of calculating adjusted earnings per share
Conference Call
A presentation of the results for the Quarter and Half Year to June 30 2016 and the outlook for Caledonia is available on Caledonia’s website (www.caledoniamining.com). Management will host a “Question and Answer” call
at 5pm British Summer time on August 15, 2016. Details for the call are as follows:
Date: August 15, 2015
Time: 1700 London /1800 Johannesburg, Zurich, Frankfurt /Noon Toronto, New York
Conference Details
Conference Name: Caledonia Mining Q2 Results
Conference Password: Caledonia
Dial in numbers:
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