JOHANNESBURG (miningweekly.com) – TSX- and Aim-listed Caledonia Mining on Thursday reported reduced profit for the three months and nine months ended September 30 on the back of lower-than-expected gold production at its Blanket gold mine, in Zimbabwe.
Caledonia reported a net profit of C$1.1-million for the quarter ended September, down from C$3.7-million in the corresponding period the year before. This translated into adjusted basic earnings a share of 1c for the three-month period, compared with 7.2c previously.
Net profit for the nine months ended September 30, was C$5.4-million, as opposed to the net profit of C$11.4-million achieved in the first nine months of 2013.
Caledonia noted that gold production for the third quarter had declined year-on-year, from 12 042 oz produced in the third quarter of 2013, to 9 890 oz in the period under review, which the company attributed to lower-than-expected tonnages and head grades.
The company added that logistical constraints on 22 Level, 750 m below surface, had restricted Blanket's ability to increase mined throughput to counterbalance the lower grade without restricting the required development to access resources below 750 m.
The company said, however, that its revised investment plan was expected to address these issues, with the mine remaining on track to produce the targeted 400 000 oz this year.
"The revised investment plan for Blanket mine, which was announced on November 3, addresses the logistical constraints on 22 Level, which restrict the ability to increase production at the same time as increasing the necessary amount of development work.
"The new central shaft, which is expected to be completed in mid-2017, will allow Blanket to increase production in the medium term and will further enhance Blanket's operational efficiency. In the longer term, the central shaft will allow Blanket to undertake further exploration and development at deeper levels, which, if successful, will allow Blanket to continue operations into the middle of the twenty-first century,” Caledonia president and CEO Stefan Hayden said.
Further, the company’s third-quarter financial performance had also been adversely affected by the further decline of the gold price during the period, as well as by changes to the Zimbabwean tax regime.
The average achieved price per ounce of gold during the quarter under review was $1 256/oz compared with $1 330/oz during the prior corresponding quarter.
Further, a revision to Zimbabwean tax regulations meant that the gold royalty payable to the government was no longer allowable for the purposes of calculating Zimbabwean income tax.
“However, from October 1, the effect of this change has been neutralised, to an extent, by a reduction in the gold royalty rate from 7% to 5%,” Caledonia noted.