Caledonia Mining has announced its operating and financial results for the first quarter of 2018. Gold production in the quarter was 12 924 oz, marginally higher than the first quarter of 2017 and in-line with expectations.
Adjusted earnings per share of 40.1 cents were 51% higher than the corresponding figure in 2017, largely due to a higher realised gold price, and the increased export credit incentive.
Operating cash flows for the quarter were $7 million and Caledonia Mining’s balance sheet remains strong with net cash of $13.4 million as at 31 March 2018.
“The first quarter of 2018 was one of very strong cash generation at the Blanket mine in Zimbabwe. The business generated operating cash flows after tax of $7 million which supported capital investment in the mine of $5.2 million and an increase in our cash balance at the end of the quarter to $13.4 million,” comments CEO of Caledonia, Steve Curtis.
“As we continue to grow production to our target of 80 000 oz by 2021, maintain cost control and benefit from economies of scale we look forward to further increasing cash flows and earnings.
“Gold production was marginally higher in the quarter compared to the first quarter of 2017 and was in-line with our expectations. We expect that production will deliver the usual increase in the second half of the year as we see the benefit of the increased level of mine development in the first half of the year, which will improve our access to higher grade areas,” continues Curtis.
“Profits in the quarter benefited from an 8% increase in the average realised gold price and a 3% reduction in all-in sustaining costs to $832/oz which contributed to a 10% increase in gross profit and a 35% increase in net attributable profit.
“On mine costs were marginally higher at $687/oz due to various operational factors which we expect to be addressed as the central shaft project is commissioned in 2020.
“Profit and cash flow were also boosted by the Government of Zimbabwe increasing the Export Credit Incentive (ECI) from 2.5% to 10% of revenue with effect from 1 February 2018.
“Regrettably our safety performance during the quarter was marred by a fatal accident at the mine on the 23 February 2018. My fellow directors and I express our sincere condolences to the family and friends of the deceased. Caledonia Mining has embarked upon renewed efforts in the business to improve our safety performance.
“The Central Shaft remains a key enabler of long term value of the business and I am pleased to report that the project is progressing on schedule and within budget and importantly, remains fully funded by operating cash flow.
“For our technical team to deliver production and a transformational project for the business is a significant achievement. Following the decision to extend the shaft sinking project in November of 2017 the shaft has now reached 30 Level (990 metres) and work has commenced on establishing the station on this level.
“The operating environment and the investment climate in Zimbabwe continue to improve with government showing very pleasing levels of support of the mining industry, including the increase in the ECI for gold producers.
“The Zimbabwe gold sector offers exciting opportunities but is in need of significant capital investment. In March, the government enacted legislation which completely removed the requirement for gold producers to implement indigenisation which has created the opportunity for Caledonia to potentially increase its stake in the Blanket Mine subject to agreement with our local partners.
“We have been encouraged by the level of support that the new leadership has shown for the mining sector and the Zimbabwean economy in general and look forward to the opportunities that the improving macroeconomic environment in Zimbabwe is likely to present.
“We maintain our guidance of 55 000 to 59 000 oz for the full year and earnings guidance of between 165 cents and 190 cents per share,” concludes Curtis.