Gold mining company Caledonia Mining Corporation has decided to defer its approval of the declaration of the second quarterly dividend of 2020 due to the uncertain business environment associated with the COVID-19 pandemic.
Caledonia has paid a quarterly dividend since 2014 and the payments are an important element of the company’s strategy to create and enhance shareholder value. “The board will therefore keep this decision under constant review as it monitors prevailing market conditions,” the company said in a statement to its shareholders.
Following the announcement by Zimbabwe’s President Emmerson Mnangagwa on 27 March 2020 of a nationwide lockdown of Zimbabwe from 30 March for a period of 21 days, to restrict the spread of COVID-19 infections, Caledonia applied for, and was granted exemption from the lockdown.
While gold mining is not an essential service, Caledonia’s Blanket gold mine in Zimbabwe is currently permitted to continue with its operations, while having to demonstrate that it can operate in a manner that contributes to the management of the spread of COVID-19 infections
As a result, production at Blanket is continuing, although at a lower rate than targeted due to the introduction of measures to reduce the risk of infections being transmitted amongst its employees.
Blanket also has consumables and spare parts in its inventory to sustain uninterrupted gold production well past the end of the current lockdowns in Zimbabwe and South Africa.
Provided the measures taken by the Zimbabwe and South African governments do not result in severe and/or prolonged interruptions to operations, the effect of such measures should not impede the company’s ability to resume the payment of quarterly dividends.
Caledonia’s cash position on March 26 was $12.5 million. At the current quarterly dividend rate of 7.5 cents per share, the dividend payment that was scheduled for payment in April amounts to approximately $860 000 – less than seven per cent of Caledonia’s currently available cash.
“The COVID-19 pandemic has elevated global levels of uncertainty. I have full confidence that our business will emerge from this situation substantially unchanged, but, out of an abundance of caution, we have decided to defer the dividend decision until we have greater clarity on the wider implications of this highly fluid situation,” says Caledonia Mining Corporation chairman Leigh Wilson.
“The resumption of dividends will depend on, inter alia, Blanket maintaining a reasonable level of production; receiving payment in full and on-time for all gold sales; being able to make the necessary local and international payments and being able to replenish its supplies of consumables and other items.
Caledonia entered the unprecedented situation with a strong balance sheet such that it can withstand an interruption to production of several months.
“Our balance sheet remains in an enviable position and the dividend remains comfortably affordable. The dividend deferral is a continuation of the prudent approach to capital allocation that we have followed for several years – a path that we expect to continue,” Wilson concludes.