HARARE –Caledonia Mining Corporation anticipates a positive performance in the last half of the year following a subdued performance in the second quarter ended June, 30, 2018, with the company reporting that production was adversely affected by lower than planned tonnes and grade.

Caledonia’s operations are focused on Southern Africa and its primary asset is a 49 percent interest in the Blanket Mine ("Blanket") in Zimbabwe.

Commenting on the financials for the second quarter ended June, 30, 2018, Caledonia’s CEO, Steve Curtis said ‘the second quarter of 2018 was a difficult period for the business as production was affected by lower than expected grade and tonnes mined.’

“Production of 12,657 ounces was marginally higher than the second quarter of 2017 (12,521 ounces) and in line with our expectations for our 2018 guidance range of 55,000 – 59,000 ounces,” he said.

Gold produced in the six months period to June, 30, 2018 reached 25,582(oz) compared to 25,315(oz) achieved in the same period last year, which is a marginal 1.1 percent increase.

“Grade for the quarter was 3.19g/t, this is below target due to difficulties in accessing broken ground at AR South and higher than expected dilution at the Blanket ore body due to the introduction of long-hole stopping on the grounds of safety.

“Corrective measures to improve grade have been taken and it is expected that the grade and production tonnages will increase over future quarters, particularly in the fourth quarter of 2018,” said Mr Curtis.

Caledonia’s Chief Operating Officer, Dana Roets, said that during the quarter the company faced problems with tons move and was 3 percent less than the comparison six month last year due to low grade periods in Lima as well as logistical constraints especially at Eroica.

The company incurred challenges of reduction in cash, which is a function of slightly lower production than the company would have liked.

Mr Curtis said that the company will do whatever is necessary in a ‘very difficult environment to improve the working capital drain.

“Zimbabwe is still going through a very difficult liquidity period and we as operators who are spending a lot of money and needing to invest a lot of money, do whatever is necessary to ensure that we manage and protect the cash balances that we had in the business,” he said.

The company reported a negative working capital movements during the quarter which had an adverse effect on operating cash flow with a net operating cash burn of $1.2 million during the quarter.

“This, combined with capital investment of $5.6 million during the quarter, had a negative impact on the balance sheet with a net cash balance of $5.3 million at the end of the quarter,” reads the CEO’s statement.

“Underlying cash flows remained robust: pre-tax operating cash flows in the quarter before working capital movements were $6.3 million, compared to $7 million in the first quarter of 2018 and $4.9 million in the second quarter of 2017.”

The group reported a satisfying cost performance for the quarter, with on-mine and all-in sustaining costs being well contained. On-mine costs of $717 per ounce for the quarter were 3 percent higher than the corresponding quarter of 2017 and the all-in sustaining costs of $856 per ounce was flat year on year.

“In the light of lower grade and tonnage for the quarter we are pleased to see this level of cost control in the business and remain confident in our longer-term cost guidance target of $700 - $800 per ounce as the business grows towards 80,000 ounces per year by 2021,” said Mr Curtis.

Gross profit increased by 4.7 percent to $11,367 million in the period under review from $10,861 million recorded in the same period last year.

The marginally higher gross profit reflects the higher gold sales and higher realised gold price, offset by the increased on-mine costs.