AMN - ZIMBABWE: Strong 2019 performance at Blanket mine

Caledonia Mining Corporation achieved impressive financial and operating results during 2019 at Blanket Gold Mine in Zimbabwe, highlighted by record gold production of 16,876 ounces in the December quarter. During 2019 there were 55,182 ounces of gold produced, up from 54,511 ounces in 2018.

Grade dilution experienced in the early part of 2019 has been resolved and the average grade for the year was 3.31 g/t, up from 3.26 g/t in 2018, The average grade for the December quarter was 3.61 g/t, up from 3.27 g/t in the corresponding quarter of 2018.

Gold recoveries have improved following the installation of a new oxygen plant during the December quarter. Recovery was 93.8 per cent compared to 92.8 per cent in Q4 of 2018.

The company's CEO Steve Curtis said: “I am delighted by Blanket Mine’s strong performance which resulted in a record level of production in the quarter. Increased production, combined with lower on-mine costs per ounce and an improved gold price, resulted in a substantial increase in profit.

"Gross profit for the year increased by 44 per cent to over $31 million; gross profit for the quarter was over 100 per cent higher than Q4 2018 and 33 per cent 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. 

“All in sustaining costs (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 (and its successor, the gold support price) both of which were terminated in the course of the year. After adjusting for the effects of these schemes, which were government grants intended to encourage increased gold production, AISC per ounce in the year was approximately 7 per cent 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 (part of which relates to increased stocks of diesel to protect against interruptions to the electricity from the grid) 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."

Regarding ongoing development work, Curtis said the Central Shaft would continue to be the main focus of 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."

www.caledoniamining.com