Gold miner Caledonia Mining’s second quarter, ended June 30, saw significant operating recovery at its Blanket mine, in Zimbabwe, with production having increased by 18% from the previous quarter of the year as grades improved.

Combined with a strong gold price environment, this delivered materially higher revenues.

While still lower year-on-year, with the second quarter of 2025 a record one owing to exceptional grades which enhanced production and financial performance, quarter-on-quarter improvement is clear and is expected to continue in the second half the year, Caledonia points out.

Initiatives to increase production at Blanket are expected to materialise towards the end of the third quarter, with management confident of a strong operating performance at Blanket in the second half of this year, particularly in the fourth quarter.

Increased sustaining capital in the second half is expected to result in production levels at Blanket from 2027 that are higher than current guidance.

Workstreams on the Bilboes project, meanwhile, are proceeding as planned, with good progress highlighted on raising the final elements of the funding package; and the front-end engineering design having started and the procurement for the first tranche of long-lead-time equipment is in progress.

Blanket produced 17 360 oz of gold during the quarter, an 18% increase on the preceding quarter owing to improved access to high-grade mining areas.

The grade has continued to improve in July.

The average feed grade in the quarter was 2.9 g/t compared with 2.5 g/t in the preceding quarter and 3.4 g/t in the comparative quarter.

Operating improvement initiatives at Blanket, including the transition to a seven-day operating schedule and improved access to higher-grade mining areas, are beginning to deliver positive results and support expectations for higher production and lower on-mine costs per ounce in the second half of the year.

Revenue increased by 16% year-on-year to $75.9-million, mainly owing to a stronger realised gold price; and increased 14% quarter-on-quarter from $66.4-million, reflecting improved production in the period under review.

The average realised gold price increased by 34% to $4 259/oz sold compared with the comparable quarter of 2025 but was 12% lower than the preceding quarter.

Consolidated gold sales (which includes gold production from Bilboes where limited production continues) were 17 811 oz.

Sales exclude 3 589 oz of gold finished goods inventory on hand at the end of the quarter which was sold immediately post.

Gross profit increased by 16% year-on-year to $39.2-million, owing to higher gold sales revenues arising from a stronger average realised gold price, partly offset by lower ounces sold; and increased by 22% quarter-on-quarter from $32.1-million, reflecting improved production and sales.

On-mine costs in the quarter and half year include considerable employee benefits costs, which do not reflect core operating activities, were also adversely affected by the lower grade in the quarter.

On-mine costs in the quarter were $1 675/oz sold, 49% higher than the comparative quarter but 3.7% lower than the $1 740/oz sold in the preceding quarter.

All-in sustaining costs (AISC) decreased by 3% to $2 678/oz sold compared with the preceding quarter owing to the higher grade.

Earnings before interest, taxes, depreciation and amortisation increased by 16% year-on-year to $45.8-million, with this including $11.5-million of gains arising from the revaluation of derivative financial instruments.

Excluding the $11.5-million net fair value gain recognised in the quarter and the $8.5-million gain on the sale of the solar plant recorded in the comparative quarter, profit after tax increased by 23% to $18.5-million.

Basic earnings per share increased to $1.36 a share, up 28% in the comparable quarter and 71% from $0.80 a share in the preceding quarter, reflecting increased profitability, supported by favourable gold prices, and positive fair value adjustments recognised during the quarter.

Net cash generated from operating activities increased from $28.1-million to $28.4-million.

Net cash and cash equivalents increased to $167.8-million from $8.2-million at June 30, 2025, reflecting the continued cash generation from operations and receipt of proceeds from the convertible senior notes issued in January.

The group’s liquidity position is said to provide considerable financial flexibility to support the Bilboes project.

It is expected that the first physical on-site activity will start in October, being the construction of contractor accommodation and related infrastructure works.

GUIDANCE
The Blanket mine’s production guidance for the year remains at 72 000 oz to 76 500 oz, while on-mine cost per ounce guidance has been increased to $1 600/oz to $1 800/oz sold, up from $1 500 /oz to $1 700/oz sold.

The increased guidance recognises inclusion in on-mine operating costs of dividends payable to Blanket employees, which arise from the 10% shareholding in Blanket that is owned by an employee trust, among others.

AISC guidance range has also increased to between $2 500/oz to $2 700/oz sold, up from $2 100/oz to $2 300/oz sold.

The increase includes the impact of higher royalty expenses and $4-million to prepare for possible oxide mining and processing operations at Blanket.

Capital expenditure (capex) guidance for the group in 2026 was $178.9-million, comprising sustaining capital investment of $43-million at Blanket, $132.1 million of growth capex at Bilboes and $3.8-million of exploration at Motapa.

Revised capex guidance for the group this year has been reduced to $103.3-million, with the planned capex at Bilboes included in this not reflecting any change in the project timetable, scope or costs, but rather a better understanding of the timing of deposits required for long-lead time equipment which continues to emerge from the ongoing procurement programme.

2027 OUTLOOK
Management anticipates that gold production at Blanket in 2027 will exceed the previous guidance of 72 000 oz to 76 500 oz owing increased run-of-mine production arising from the introduction of the seven-day shift and the potential for oxide mining at the K-pits.

The increased AISC guidance for 2026 includes $3.5-million in respect of planned upgrades to the crushing and carbon-in-leach plants at Blanket to process the increased rate of ore production.

Management is finalising the governance and procurement aspects relating to this incremental expenditure.

It says the timing and quantum of increased gold production in 2027 will be determined by the timescale required to complete the necessary work, which is currently being finalised.

Management is also finalising a resource estimate for the K-pits and is assessing the timing of any increased production, the required capital expenditure to achieve higher production and the resultant effect on on-mine and AISC.

It expects that firm guidance for 2027 in respect of production, costs and operating costs will be provided after the 2027 budgeting exercise has been completed at the end of this year.