Harare – Triple-listed Caledonia Mining Corporation’s gold production dipped 8pc to 11,948 ounces in the first quarter ended 31 March 2019 from 12,924oz produced in comparative 2018 quarter.
Caledonia which is listed on AIM, TSX and NYSE with operations at the Blanket mine in Zimbabwe said production was adversely affected by lower grade, although this was anticipated as part of the mine plan.
Chief executive Steve Curtis said “We maintain our full year production guidance of 53,000 – 56,000 ounces for 2019. I look forward to an improved cost performance in the remaining quarters of the year as we anticipate that the beneficial effects of improved production will be felt in the subsequent quarters of 2019.”
Consolidated operating profit before tax was 105pct higher than Q1 2018 to $12.3 million for the quarter under review attributed to gains of $3.3 million on foreign exchange following the devaluation of the domestic Zimbabwean currency and a profit on the sale of a subsidiary of $5.4m.
Net profit came in at $10.7 million compared to $3.9 million in the comparable Q1 2018, representing an increase of 176 percent.
Operating cash flows for the Quarter were $6.3 million (Q1 2018; $7.0 million) and the Company’s “balance sheet remains strong” with net cash of $9.7 million as at 31 March 2019.
The $6.3 million cash generation was sufficient to support both capital investment in the Central Shaft project of $5.1 million and Caledonia’s regular quarterly dividend.
Curtis said work on sinking the Central shaft remains on track and expects it to be completed in the middle of this year after which a further 12 months will be needed to equip the shaft before it is commissioned in mid-2020 with production expected to increase to 80 000oz per annum by 2022.
“This production increase will contribute significantly to reducing operating costs through economies of scale and we look forward to further increasing cash flows and earnings as the shaft is commissioned,” Curtis said.
He highlighted that the early part of the quarter was made more challenging by significant macroeconomic disruptions in particular the currency peg between domestic currency and the US dollar in Zimbabwe, which prior to February 22 Monetary policy changes was maintained at 1:1 by the government.
“Notwithstanding the challenges experienced in the Quarter, we remain encouraged by the overall direction of policy development which we believe will result in improved operating conditions and a better investment climate in Zimbabwe.
“The most recent positive development in this regard is the introduction of a gold support price of $1,368 per ounce, a premium above the prevailing spot price in order to incentivize domestic gold production.”
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