Caledonia Mining Corporation PLC (“Caledonia” or the “Company”) announces its operating and financial results for the first quarter of 2017 (“Q1” or the “Quarter”).
| Q1 2016 | Q1 2017 | Comment | |
| Gold produced (oz) | 10,822 | 12,794 | Increased production due to increased tonnes milled, higher grade and improved recoveries |
| On-mine cost per ounce ($/oz) | 689 | 659 | Lower cost per ounce as fixed costs are spread across increased production ounces |
| All-in Sustaining Cost ($/oz) (“AISC”) | 956 | 857 | Lower cost per ounce due to lower on-mine cost, the export incentive credit and lower sustaining capital expenditure, however, this was offset by higher share-based payment costs |
| Average realised gold price ($/oz) | 1,166 | 1,213 | Increased realised gold price reflects the increase in gold price |
| Gross profit | 3,888 | 5,646 | Increased gross profit due to higher sales, higher realised gold price and lower costs per ounce |
| Net profit attributable to shareholders | 543 | 2,338 | Increased profit attributable to shareholders due to higher gross profit, the export incentive credit and the elimination of the hedging costs incurred in Q1 2016 |
| Adjusted basic earnings per share (“EPS”) (cents) | 2.7 | 5.3 | Increased adjusted earnings per share due to higher attributable profit |
| Net cash and cash equivalents | 8,841 | 11,722 | Increased cash due to increased operating cashflows, offset by increased working capital, particularly prepayments for capital goods, and continued high levels of investment |
| Cash from operating activities | 1,749 | 1,779 | Cash from operating activities benefitted from higher profit but was adversely affected by increased working capital and higher tax payments |
Commenting on the results, Steve Curtis, Caledonia’s Chief Executive Officer said:
The first quarter of 2017 showed an 18 per cent increase in production from the corresponding quarter in 2016. As the Blanket Mine (“Blanket”) has demonstrated in the past, increased production results in lower unit costs as the fixed cost component is spread across more production ounces. On-mine costs were four per cent lower than the comparable quarter of 2016 at $659 per ounce and all in sustaining costs were 10 per cent lower at $857 per ounce.
Higher gold production at a lower unit cost and a four per cent increase in the average realised gold price to $1,213 per ounce all contributed to increased adjusted earnings per share of 5.3 US cents for the quarter, an increase of 96 per cent on the corresponding quarter of 2016.
I am pleased that we have delivered the improved financial and operating performance whilst we have simultaneously continued to implement a significant capital project in the sinking of the new Central Shaft. The Central Shaft is currently at a depth of 750m and remains on track to commence production in the second half of 2018. Once complete, I expect the Central Shaft to enhance the operating efficiency at Blanket as it will transform the existing underground infrastructure, reduce travel times for employees to get to mining areas, shorten the tramming distances and reduce the time required to hoist ore to surface. The Central Shaft will also enable us to access deeper level resources below the 750m level and give us the flexibility to increase the pace of deep level exploration and development, securing the future of the mine for many years to come.
The business continues to be strongly cash generative with operating cash flow during the quarter of $1.8 million contributing to a robust balance sheet and the Company’s gross cash position at the end of the quarter was $11.9m. Our cash balance declined slightly from the 2016 year-end figure of $14.3m, due to significant capital investment during the quarter and the normalisation of Blanket’s working capital. I expect that 2017 will be the final year of significant capital investment in the Central Shaft project.
We have noticed mixed operating conditions in Zimbabwe in 2017. The electricity supply continues to be unstable and we continue to install equipment to protect against any future instability. We also noted an improvement in the availability of foreign exchange towards the end of the Quarter which is required to make payments outside Zimbabwe. The export incentive credit introduced in 2016 continues to contribute to the bottom line with the credit received by Blanket increasing from 2.5 per cent to 3.5 per cent of revenues with effect from 1 January 2017, contributing $576,000 in the Quarter.
Notwithstanding the improvements in underground tramming, Blanket has not been able to transport the volume of material that is necessary to achieve the target of 60,000 ounces of gold in 2017 whilst maintaining the rate of capital development that is necessary to achieve future production goals of 80,000 ounces per year by 2021. Accordingly, on May 9 2017 Caledonia announced that, in the long term interests of the business, the 2017 production tonnage target should be reduced so that the required development can be done, thereby safeguarding future production. The revised production target for 2017 is between 52,000 and 57,000 ounces of gold.
Strategy and Outlook
Caledonia remains on track to achieve the production target of 80,000 ounces by 2021 at its Zimbabwean subsidiary, Blanket Mine. The company’s strategic focus continues to be the implementation of the 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 Investment Plan remains on target in terms of timing and cost. Caledonia’s board and management believe the successful implementation of the fully funded 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 Investment Plan.
Dividend Policy
In July, 2016 Caledonia announced an increase in its quarterly dividend to 1.375 United States cents per share, or 5.5 United States cents per annum, an increase of 22 per cent. The increased dividend represents Caledonia’s current dividend policy. It is currently envisaged that the dividend of 5.5 United States cents per annum will be maintained.
Following the implementation of indigenisation in September 2012, Caledonia owns 49 per cent of the Blanket Mine in Zimbabwe. Caledonia continues to consolidate Blanket and the operational and financial information set out below is on a 100 per cent basis unless otherwise indicated.
