Caledonia Mining plc (LON:CMCL) is the topic of conversation when DirectorsTalk caught up with WH Ireland Analyst Paul Smith.
Q. Caledonia Mining last week published an update on production from the Blanket mine in Zimbabwe – what are the key points investors should note from this update?
A. Caledonia’s production update showed that in our opinion the company has got its Blanket mine production under control. A strong quarter in Q1 (19% up YOY) and a comment form the CEO on more regular production quarters rather than production building through the year. This has been brought about by changing the mine planning to incorporate a new development schedule to match production and the necessary development.
Q. In your view what does the outlook look like for the company?
A. Going forward I expect this to be an excellent year for Caledonia – Record gold prices (highest since October 2012) and a strong price outlook should mean robust profits and importantly a cash increase for the company. Especially important when you consider this is the final high capital expenditure year as the commissioning of the Central Shaft is completed and Caledonia can then begin the build up to its promised >80koz gold per year production rate.
Q. Will COVID-19 have a big impact on this year ?
A. We are of the opinion that short-term the mine is insulated from wider country lock-downs and Southern-African supply chain disruptions as it has an isolated work force (who mostly live on site with their families – perhaps up to 95%) and after years’ operating in Zimbabwe, the mine has weeks of stocks, supplies and spares. In our view Caledonia Mining has a strong Balance sheet and can weather the COVID storm better than many of its listed peers.
