LSE-, Aim- and TSX-listed gold producer Caledonia Mining has achieved a new production record at its flagship Blanket mine, in Zimbabwe, reporting an 11.5% year-on-year output improvement to 56 133 oz for 2017.

The London-based company, which owns a 49% stake in the Blanket gold mine, said all-in sustaining costs fell 7% year-on-year to $847/oz, helping the miner to boost profit by about 11% to $9.4-million.

The company generated free cash flow before finance of $2.9-million, after allowing for $24.5-million in operating cash flow and $21.6-million in investment spending.

Gold output benefited from higher grades and increased mill throughput, where the benefits of the improved underground ore handling system installed as part of the significant investment programme to develop the deeper levels of the mine are delivering operational efficiencies and cost savings.

The upgraded resource estimate for the Blanket mine led to a decision to extend the Central shaft currently under development by a further 250 m to allow access to a further two production levels and potentially extend the mine’s life by four years to 2031.

“For the next two years, the bulk of the cash generation will be deployed to the investment plan at Blanket, which we are confident will further increase cash flows as we increase production to 80 000 oz of gold by 2021. Once the investment plan is completed towards the end of 2020, we expect to have substantial free cash flows to deploy elsewhere,” CEO Steve Curtis said in a statement.

He welcomed wider policy changes in Zimbabwe under the new government, which contemplates the removal of the indigenisation requirement for gold mining companies. These pronouncements have now passed into law and, accordingly, the boards of Caledonia and Blanket have agreed to implement a rights issue to raise about $4-million, to be underwritten by Caledonia’s Zimbabwe subsidiary.

Blanket will use the proceeds to advance work on certain of its satellite properties. Assuming that Blanket’s indigenous shareholders do not subscribe for shares under their rights, it is expected that Caledonia’s shareholding in Blanket will increase from 49% to slightly more than 50%.