JOHANNESBURG (miningweekly.com) – Gold producer Caledonia Mining was “well-positioned” to continue implementing its growth strategy, notwithstanding the current volatility in the gold price, president and CEO Stefan Hayden said on Wednesday.

He noted in a statement that the third quarter of 2013 presented continued challenges, owing to the prevailing lower gold price, but added that its 49%-owned Blanket mine in Zimbabwe retained its position as one of the lowest cost gold producers in Africa.

“The adverse effect of the lower gold price on profitability was mitigated somewhat by lower costs. Blanket's on-mine cost an ounce, all-in sustaining cost an ounce and all-in cost an ounce were all lower in the third quarter than in the preceding quarter and in 2012,” he explained.

Hayden added that, in response to the lower gold price, Caledonia, working with Blanket management, also introduced measures to increase mine production from about 1 030 t/d in the first quarter of 2013 to about 1 075 t/d in the second quarter and 1 110 t/d in the third quarter.

The company reported an after-tax net profit of C$3.7-million for the third quarter, compared with C$3-million in the previous quarter. This was also a turnaround from the net loss of C$7.2-million reported in the third quarter of 2012, which had been impacted by a C$12.1-million noncash expense arising from the implementation of indigenisation at the Blanket mine.

In the quarter under review, the company sold 12 042 oz of gold at an average price of C$1 330/oz.

Basic earnings a share for the third quarter were C$0.07 a share, up from C$0.05 in the previous quarter and a C$0.14 loss in the 2012 third quarter.

Gold production in the third quarter also benefitted from an improvement in the realised grade. The average realised grade in the third quarter was 4.03 g/t, higher than the 3.82 g/t achieved in the previous quarter but lower than the 4.16 g/t achieved in 2012. 

Gold recovery also improved in the third quarter, with metallurgical recoveries for the quarter increasing to 93.6%, from 93.2% in the preceding quarter, and virtually unchanged from the 93.7% achieved in 2012. 

“Blanket's metallurgical plant has considerable surplus capacity and is one of the most efficient in the industry, which reflects our recent investments and the skills of Blanket's management and employees,” said Hayden.

At September 30, Caledonia had cash and cash equivalents of C$25.1-million, up from C$22.5-million for June 30 and down from C$27.9-million for December 31, 2012.

Supported by Caledonia’s strong cash position and continued cash generation at operational level, development and exploration activity at Blanket has accelerated, said Hayden.

“We continue to move towards achieving our targeted increase in production. In light of the increased rate of production, in August, we increased our production guidance for 2013 from 40 000 oz to 44 000 oz. Production is expected to increase to 48 000 oz in 2014 and 52 000 oz in 2015.

“Exploration at Blanket below 750 m and at the mine’s satellite projects continues and we continue to be encouraged by the results evaluated so far. Development and exploration work at GG and Mascot continues to identify mineralisation.” 

Meanwhile, an accident at Blanket in the third quarter resulted in one fatality and two employees being injured. Following this accident, Blanket management increased measures to ensure that the prescribed safe-working practices were strictly adhered to. 

“The directors and management of Caledonia express their sincere condolences to the family and colleagues of the deceased employee,” Hayden added.