Caledonia reports poor quarterly results following Bilboes start-up

15th May 2023

By: Darren Parker

Creamer Media Contributing Editor Online


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The integration and start-up of Caledonia’s Bilboes operation, along with technical challenges at the Blanket mine, both in Zimbabwe, had a significant impact on the company’s financial performance for the quarter ended March 31.

The quarter's operating and financial results, released on May 15, are the first to reflect Caledonia's ownership of Bilboes, the acquisition of which was completed on January 6.  

The company said the near-term actions relating to Bilboes were to restart oxide mining operations and prepare a revised feasibility study in respect of the larger sulphide project. However, technical challenges were encountered on restarting the oxide mining.

Caledonia hopes gold mining from near-surface oxide deposits will be cash neutral and will help the company to maintain Bilboes' operational integrity pending completion of the feasibility study.

In addition, the company stated that the waste material that would be moved as part of the oxide mining activities was material that would have had to be moved later when work started on the main sulphide project.

The Blanket mine suffered some technical challenges during the quarter, which adversely affected its contribution. Caledonia management stated that it believed these challenges to have now been resolved, and that it was “encouraged” by production and cost data since April.

“We are confident these issues have been identified and addressed,” Caledonia CEO Mark Learmonth said.

The company has therefore reiterated its 2023 production guidance at Blanket of 75 000 oz to 80 000 oz.

Gross revenues of $29.4-million were reported for the period, a decrease from $35.1-million in the first quarter of last year. The decline in revenues was primarily attributed to lower gold production at the Blanket mine.

The period also saw a reduced earnings before interest, taxes, depreciation and amortisation (Ebitda) contribution of $2.25-million, in contrast with $14.5-million a year prior. The disappointing contribution was primarily attributed to lower revenues and higher operating costs at both the Blanket and Bilboes mines. The Blanket mine contributed an Ebitda of $11.3-million in the quarter, compared with $19.5-million in the same period last year.

The on-mine cost per ounce increased significantly, from $698/oz in the first quarter of 2022 to $1 196/oz. The company said that about $300 of the increase could be attributed to the Bilboes oxides mining activities, which only began in the last week of the quarter.

“Although the start-up of the Bilboes oxide mining activity was disappointing, this does not detract from the attraction of the main sulphide project. The sulphide resource is based on direct drilling results and has been subjected to independent third-party reviews,” Learmonth said.

He added that work had started on a revised feasibility study for the sulphide project, which would consider updated commercial assumptions and would focus on the most judicious way to commercialise the project

Despite this, operating costs were incurred for a significant portion of the quarter. The on-mine cost per ounce at the Blanket mine rose owing to lower gold production, resulting in fixed costs being spread across fewer ounces, and higher-than-expected electricity costs.

The all-in sustaining cost per ounce reached $1 412/oz, compared to $848/oz last year. The increase was primarily driven by the higher on-mine cost and advisory fees associated with the completion of the Bilboes acquisition.

The adjusted loss per share amounted to 29.1c, in contrast to a profit of 62.5c a share in the same period last year. The reduced Ebitda for the quarter was further impacted by higher administrative expenses, an increased interest charge, and a rise in the effective tax rate.

Net cash outflow from operating activities amounted to $900 000, compared to a net cash inflow of $10.2-million for the equivalent period in 2022.

The net cash and cash equivalents stood at $3.2-million, down from $14.4-million last year. Caledonia said the negative impact on the net cash position at the end of March was caused by a build-up in undelivered gold, valued at about $2.8-million, pending the implementation of a new gold sale mechanism in early April.

However, net cash was subsequently enhanced by the gold sales in early April and the receipt of about $5-million from the Zimbabwe leg of the equity raise.

Dividends of 14c a share were paid in January.

Caledonia management has said that it remained focused on addressing these challenges and working towards improving operational efficiency and productivity going forward.

“Although the start-up of the Bilboes oxide mining activity was disappointing, this does not detract from the attraction of the main sulphide project. The sulphide resource is based on direct drilling results and has been subjected to independent third-party reviews,” Learmonth said.

He noted that, following Caledonia's oversubscribed fundraise in March and April, which raised about $16.5-million, the company’s balance sheet and operational flexibility has improved.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online


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