LSE-listed Caledonia Mining expects to report an adjusted profit before tax for the year ended December 31, 2023, materially below market expectations, owing to increased operating costs and several significant one-off non-operating costs in the final quarter of 2023.

The increase in operating costs comprises higher-than-expected overtime payments and power costs at the Blanket mine, in Zimbabwe. In relation to non-operating costs, general and administrative costs rose with global inflation and these also included higher-than-expected staff termination costs.

The company also encountered higher financing costs, including hedging, interest and foreign exchange losses, and a one-off impairment charge in relation to a value-added tax refund claim at the Blanket mine’s solar project.

Reassuringly, a significant proportion of these cost increases are not expected to be carried through into this year. Specifically, costs associated with Bilboes are now reduced to care and maintenance only and the project was cash neutral in the fourth quarter of 2023.

Production and costs at Blanket this year, to date, are also within expectations of full-year guidance, and the company is introducing measures aimed at reducing electricity costs over the medium term.

The company notes that the Blanket mine has continued to perform well since the end of the quarter ended September 30, 2023, with full-year production for 2023 of 75 416 oz. As a result, the company expects to report revenue for the full year in line with market expectations.

"It is regrettable that, at a group level, we have been adversely affected by a series of higher-than-expected costs in the second half of 2023 which have had a negative effect on the full year profitability.

“The performance of Blanket mine remains strong and, notwithstanding some unforeseen overtime and power cost issues in the second half, has met guidance and produced a robust performance for the second half of 2023.

"A number of the other cost items are not anticipated to be recurring, whereas others have arisen from our decisions to invest in the business, most notably around personnel and advancing the Bilboes sulphide project. I am confident that many of these will not recur in 2024 which has started positively and I look forward to the future with optimism as we pursue our goal of becoming a multi-asset production company,” notes CEO Mark Learmonth.

As at December 31, 2023, the company had cash on hand of $6.7-million and overdraft and term loans of $17.7-million.

Caledonia will publish its operating and financial results for the quarter ended December 31, 2023, on or before March 28.