Increased production, combined with lower on-mine costs per ounce and an improved gold price, resulted in a substantial increase in profit,” says Caledonia CEO Steve Curtis.
“I am delighted by Blanket Mine’s strong performance which resulted in a record level of production in the Quarter.
“Gross profit for the Year increased by 44% to over $31 million; gross profit for the Quarter was over 100% higher than Q4, 2018 and 33% higher than in the preceding quarter.
“On-mine costs per ounce for the Year were $651 compared to $690 in 2018 due to lower electricity costs in the first part of the year and lower on-mine administration costs due to the devaluation of the Zimbabwe currency.
“AISC for the year are not directly comparable with the AISC reported in 2018 which benefited by approximately $120 per ounce due to the export credit incentive scheme both of which were terminated in the course of the year.
“After adjusting for the effects of these schemes AISC per ounce in the year was approximately 7% lower than in 2018.
“The excellent financial and operating performance is particularly pleasing given the difficult start to the Year and is testament to the resilience and tenacity of the management and workforce at Blanket and at Caledonia.
“The improved performance was achieved with no compromise in safety performance. The Total Injury Frequency Rate has been substantially reduced following a concerted effort by management over the last 18 months to improve and enforce safety standards.
“Profit in the year was further enhanced by a net foreign exchange gain of approximately $30 million. This gain, which is largely unrealised, was due to the sharp devaluation of the Zimbabwe currency from February 2019 onwards, which reduced the US Dollar values of bank loans and the deferred tax liability.
“If exchange rates remain unchanged, these unrealised losses will be realised from 2021 onwards as the deferred tax liability begins to unwind and the term loans begin to fall due for payment.
“Basic earnings per share (“EPS”) for the year on an IFRS basis were 382 cents per share compared to 99 cents per share in 2018; IFRS EPS after adjusting for the net foreign exchange gain were 152 cents per share compared to 97 cents in 2018.
“EPS after adjusting for other items including deferred tax and the profit on the sale of a subsidiary were 144 cents for the Year compared to 132 cents in 2018.
“Cash flows remain strong, despite continued substantial investment in the Central Shaft. Cash flows from operating activities were $23.9 million for the Year compared to $21.1 million for 2018.
“Cash flows from operating activities in the year are after a $4.2 million increase in working capital due to increased inventories and higher prepayments and lower payables which reflect the reduced availability of supplier credit in Zimbabwe due to the high level of inflation.
“Capital investment in the year was $20 million (2018: $20 million) and included approximately $1.5 million of unbudgeted expenditure on additional diesel generators to protect against the sharp increase in electricity outages from July 2019.
“The Central Shaft continues to be the main focus of our investing activities: when the new shaft is commissioned towards the end of 2020, Blanket will be able to increase production to the target rate of approximately 80,000 ounces of gold per annum from 2022 onwards.
“The shaft sinking phase of the project was completed in July 2019 and work has commenced on equipping the shaft; the substantial capital investment period is expected to be completed in the third quarter of 2020.
“In parallel with the improved financial and operating performance, I am also pleased to report an improvement in the operating environment in Zimbabwe.
“Although the country continues to face challenges, the introduction of the interbank rate early in 2019 allowed 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 in July and early August have largely been addressed following the conclusion of an agreement whereby Blanket (and other gold producers) purchases power which is imported into Zimbabwe.
“This power is cheaper than under the previous arrangements prior to the devaluation of the Zimbabwe currency 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.
“The increased monthly production towards the end of the Year in conjunction with the higher price of gold and lower costs per ounce means that our rate of cash generation has improved.
“In light of the improved performance and the brighter outlook for 2020, Caledonia increased its quarterly dividend from 6.875 cents per share to 7.5 cents per share in January 2020.
“The increased dividend equates to an annual dividend of 30 cents per annum which compares to net cash from operating activities in 2019 of 169 cents per share.
“The board will review Caledonia’s future dividend distributions as appropriate while considering the balance between delivering returns to shareholders and pursuing the significant growth opportunities within Zimbabwe and in line with a prudent approach to financial management.
“I expect 2020 to be a pivotal year for our business with the commissioning of the Central Shaft and the improved operating performance. The level of the gold price and the effects of the Covid-19 pandemic are being closely monitored and I look forward to keeping our shareholders updated on our progress.”
2019 Financial highlights
- Gross revenues of $75.8 million (2018, $68.4 million).
- Gross profit of $31.1 million (2018, $21.6 million) at a gross margin of 41% (2018, 32%).
- EBITDA of $29.9 million (2018, $19.1 million) at a margin of 39% (2018, 28%).
- On-mine cost of $651 per ounce (2018, $690 per ounce).
- Normalised all-in sustaining cost (i.e. excluding the effect of the export credit incentive and its successor scheme) of $856 per ounce (2018, $920 per ounce).
- IFRS earnings per share of 382 cents (2018, 99 cents); IFRS earnings per share adjusted for net foreign exchange gains of 152 cents (there were no significant foreign exchange gains in 2018).
- Net cash from operating activities of $18.1 million (2018, $17.7 million).
- Net cash and cash equivalents of $8.9 million (2018, $11.2 million) after capital investment of $20 million, including the Central Shaft.
- Total dividend paid of 27.5 cents per share.
- 55,182 ounces of gold produced in the Year (2018, 54,511 ounces); record production of 16,876 ounces in the Quarter (fourth quarter of 2018 (“Q4 2018”), 14,952 ounces).
- Grade dilution experienced in the early part of 2019 has been resolved: average grade for the Year was 3.31 g/t (2018, 3.26 g/t); average grade for the Quarter was 3.61 g/t (Q4 2018, 3.27 g/t).
- Gold recoveries have improved following the installation of the new oxygen plant in the Quarter: gold recovery in the Quarter was 93.8% (Q4 2018, 92.8%).
- Shaft sinking at Central shaft was completed in July 2019 to the target depth of 1,204 metres. Work has commenced on equipping the shaft with commissioning expected before the end of 2020.
- Improved safety performance as a result of intensive management intervention.