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Caledonia records strong first quarter

12th May 2020

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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Gold miner Caledonia Mining recorded a continued strong financial and operating performance at its Blanket gold mine, in Zimbabwe, in the quarter ended March 31, Caledonia CEO Steve Curtis says.

“The management initiatives which were implemented in 2019 have resulted in an almost 20% increase in gold production in the first quarter of 2020 compared with the first quarter of 2019,” he notes.

The mine produced 14 233 oz of gold in the quarter.

The higher output, combined with lower on-mine costs per ounce and an improved gold price, resulted in a considerable increase in profit, with the gross profit for the quarter having more than doubled to $10.6-million, compared with the $4.3-million gross profit reported for the first quarter of 2019.

The performance was also reflected in strong cash generation – net cash flow from operating activities was $10.9-million in the quarter under review, compared with $6.6-million in the first quarter of 2019.

Caledonia ended the quarter with net cash and cash equivalents of $13.8-million – an increase of $4.9-million year-on-year.  

“In parallel with the improved financial and operating performance, I am also pleased to report an improved operating environment in Zimbabwe.  Although the country continues to face challenges, the introduction of the interbank rate early in 2019 allows us to better protect our workers from the effects of high inflation.

"The interruptions to the supply of electricity from the grid which we experienced last year have largely been addressed following the conclusion of an agreement allowing Blanket and other gold producers to buy power that is imported into Zimbabwe. This power is cheaper than under the previous arrangement and Blanket can manage the reduced incidence of power interruptions using its increased suite of diesel generators.

"We are also well-advanced in the evaluation of a solar project to provide some of Blanket’s power supply and reduce its dependence on imported power during daylight hours,” Curtis says.

He notes that the coronavirus pandemic had no appreciable effect on Blanket or Caledonia during the quarter because lockdowns were only implemented by the Zimbabwe and South African governments to manage the virus at the end of the quarter.

During the lockdowns, which extended for much of April, Blanket achieved about 93% of its normal targeted production by using its stocks of consumables and implementing measures to safeguard employees.

In early May, Blanket resumed full production and Curtis expects production to continue as planned provided Blanket’s workforce remains healthy and its supply chains and access to market for the gold produced remain open.

The production guidance for this year remains unchanged at 53 000 oz to 56 000 oz.

“The Central Shaft is the focus of our investing activities: when it is commissioned, Blanket will be able to increase production to the target rate of approximately 80 000 oz/y of gold.

"Work on the Central Shaft continued throughout the lockdowns; however, completion of the project requires specialised equipment and contractors to travel to Blanket from South Africa which under the restrictions is not currently possible.

"This has not yet resulted in a significant delay to the project and we are receiving a high level of support from the Zimbabwe government to address these issues with the relevant authorities in South Africa,” says Curtis.  

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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