- Aims to produce 74,000-78,000 ounces of gold by year-end
- Q3 gold production declined to 18,992 ounces
- Needs to produce 5,728-7,061 ounces per month in Q4 to meet its targets
- Rising costs ($1,056/oz on-mine, $1,501/oz all-in sustaining) pose challenge
Harare- Caledonia Mining Corporation, a leading gold producer, has reported a third-quarter gold production of 18,992 ounces from 21,772 ounces produced in the comparable quarter due to lower grade and reduced metallurgical recoveries at Blanket Mine.
However, the value generated during the quarter was up compared to prior quarter. The group’s gross profit was up at US$19.3 million after generating a revenue of US$46.9 million from a gross profit of US$14.1 last year.
In terms of year to date gold output, gold produced in the nine months was 56,815 from 55,244 ounces produced in the same period in 2023 narrowing the FY end target.
The company is targeting to produce between 74,000 and 78,000 ounces of gold for the full year, but achieving this goal may be challenging. With only three months left before year-end, Caledonia Mining Corporation needs to significantly ramp up production.
To reach the lower end of the guidance range (74,000 ounces), the company requires producing approximately 5,728.33 ounces per month for the remaining quarter. For the upper end (78,000 ounces), the monthly production target increases to around 7,061.67 ounces.
To reach the lower end of the guidance range, the company needs to produce 17,185 ounces of gold, in addition to the 56,815 ounces already produced in the nine months ended September 30 cumulatively. This would bring the cumulative total to 74,000 ounces by year-end.
To attain the upper bound of the guidance range on a cumulative basis, Caledonia must generate 21,185 ounces in the fourth quarter, augmenting the existing 56,815 ounces to achieve a year-to-date total of 78,000 ounces by December 31.
The company's historical record quarterly output of 21,772 ounces, achieved in the preceding year, was facilitated by contributions from Bilboes Mine, optimized electricity supply, and favorable cost structures. While the upcoming quarter's production target falls short of this record, it approaches comparable levels. However, key differences exist, including the absence of Bilboes Mine's contributions and decreased output at Blanket Mine relative to 2023.
Furthermore, escalating electricity costs will exacerbate production expenditures, increasing the cost of production compared to the prior year. Consequently, overcoming production costs, electricity tariffs, and operational challenges will be crucial in achieving the targeted output.
During the reporting period, Caledonia's consolidated on-mine cost per ounce escalated to $1,056, representing a $128 increase from $928, primarily attributable to reduced ounces sold and elevated production costs at Blanket. Similarly, the all-in sustaining cost rose to $1,501 per ounce, up from $1,268 in 2023, driven by lower ounces sold and higher on-mine costs, predominantly labour and electricity.
These sustained cost pressures potentially compromise production efficacy. Nevertheless, the company is poised to offset these expenses by capitalizing on record gold prices, thereby mitigating the impact of diminished gold output.
Given the prevailing market conditions, Caledonia is likely to overcome cost-related challenges, leveraging robust gold prices. While achieving 78,000 ounces may prove ambitious, a mid-target outcome appears feasible. Effective cost management and operational optimization will be critical in overcoming these challenges to ensure a satisfactory output level.
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