Caledonia Mining Corporation plc (LON:CMCL) announced today its operating and financial results for the quarter ended March 31, 2020. Further information on the financial and operating results for the Quarter can be found in the management discussion and analysis and the un-audited financial statements which are available on the Company’s website and which have been filed on SEDAR.
Financial Highlights
· Gross revenues of $23.6 million, a 48 per cent increase on the $15.9 million achieved in Q1 2019.
· Gross profit[1] of $10.6 million, a 146 per cent increase on the $4.3 million in Q1 2019 at a gross margin of 50 per cent (Q1 2019, 33 per cent).
· EBITDA[2] of $10.2 million, a 162 per cent increase on the $3.9 million in Q1 2019 at a margin of 43 per cent (Q1 2019, 21 per cent).
· On-mine cost[3] of $678 per ounce (Q1 2019, $794 per ounce).
· All-in sustaining cost3 (i.e. excluding the effect of the export credit incentive) of $879 per ounce (Q1 2019, $1,039 per ounce).
· IFRS basic earnings per share of 71.2 cents (Q1 2019, 88.6 cents).
· Adjusted basic earnings per share3 of 57.3 cents (Q1 2019, 44.2 cents).
· Net cash from operating activities of $10.7 million (Q1 2019, $6.3 million).
· Net cash and cash equivalents of $13.8 million (December 31, 2019, $8.9 million)
· Total dividend paid of 7.5 cents per share – a 9.1 per cent increase on the previous dividend paid in October 2019.
· Completion of the purchase of an additional 15 per cent shareholding in Blanket Mine (“Blanket”) increasing Caledonia’s shareholding to 64 per cent.
Operating Highlights
· 14,233 ounces of gold produced in the Quarter (Q1 2019, 11,948 ounces).
· Tonnes mined and milled increased by 15 per cent compared to Q1 2019 due to several management initiatives; grade and recoveries were also slightly improved.
· Improved safety performance due to intensive management intervention.
· Equipping of Central Shaft continued as planned in the Quarter.
Effect of COVID-19 and Outlook
· COVID 19 had a negligible effect on production and capital projects in the Quarter.
· Production continued at approximately 93% of target during the three-week lockdown which started in Zimbabwe on March 30, 2020; production has subsequently returned to normal levels. Production guidance for 2020 remains unchanged at 53,000 to 56,000 ounces.
· Progress on the Central Shaft continued in April, but at a slower pace due to a reduced contractor team.
· Blanket has made substantial contributions to the in-country fight against COVID-19 and has undertaken to make further weekly donations.
· On-track to achieve on-mine cost guidance for 2020 of between $693 to $767 per ounce and all-in sustaining cost guidance of between $951 to $1,033 per ounce.
· Caledonia’s dividend of 7.5 cents per share has been declared and will be paid in May 2020. Further dividends will depend upon, inter alia, Blanket maintaining production, while also considering the balance between delivering returns to shareholders and pursuing the significant growth opportunities within Zimbabwe
Steve Curtis, Caledonia Mining Chief Executive Officer, commented:
“I am delighted by Blanket Mine’s continued strong financial and operating performance in the first quarter of 2020. The management initiatives which were implemented in 2019 have resulted in an almost 20 per cent increase in gold production in the first quarter of 2020 compared to the first quarter of 2019. Increased production, combined with lower on-mine costs per ounce and an improved gold price, have resulted in a substantial increase in profit. Gross profit for the Quarter more than doubled from $4.3 million in the first quarter of 2019 to over $10 million in the Quarter. The excellent performance was also reflected in strong cash generation: net cash flow from operating activities (i.e. before interest, taxation payments and capital expenditure) was $10.9 million in the Quarter compared to $6.6 million in the first quarter of 2019. Caledonia ended the Quarter with net cash and cash equivalents of $13.8 million – an increase of $4.9 million over the course of the Quarter.
“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.
“In parallel with the improved financial and operating performance, I am also pleased to report an improved operating environment in Zimbabwe. Although the country continues to face challenges, the introduction of the interbank rate early in 2019 allows us to better protect our workers from the effects of high inflation. The interruptions to the supply of electricity from the grid which we experienced last year have largely been addressed following the conclusion of an agreement whereby Blanket (and other gold producers) purchases power which is imported into Zimbabwe. This power is cheaper than under the previous arrangement and Blanket can manage the reduced incidence of power interruptions using its increased suite of diesel generators. We are also well-advanced in the evaluation of a solar project to provide some of Blanket’s power supply and reduce its dependence on imported power during daylight hours.
“The coronavirus pandemic had no appreciable effect on Blanket or Caledonia during the Quarter because lockdowns were only implemented by the Zimbabwe and South African governments to manage the virus at the end of the Quarter. During the lockdowns, which extended for much of April, Blanket achieved approximately 93 per cent of its normal target production by using its stocks of consumables and implementing measures to safeguard employees. In early May, Blanket resumed full production and I expect production to continue as planned provided Blanket’s workforce remains healthy and its supply chains and access to market for the gold produced remain open.
“The Central Shaft is the focus of our investing activities: when it is commissioned, Blanket will be able to increase production to the target rate of approximately 80,000 ounces of gold per annum. Work on Central Shaft continued throughout the lockdowns; however, completion of the project requires specialised equipment and contractors to travel to Blanket from South Africa which under the restrictions is not currently possible. This has not yet resulted in a significant delay to the project and we are receiving a high level of support from the Zimbabwe government to address these issues with the relevant authorities in South Africa.
“In light of the improved performance and the brighter outlook for 2020, Caledonia increased its quarterly dividend from 6.875 cents per share to 7.5 cents per share in January 2020. The increased dividend equates to an annual dividend of 30 cents per annum which compares to net cash from operating activities in 2019 of 169 cents per share. At the end of April, in light of Blanket’s strong performance and the return to normal levels of production including renewed access to supply chains, the board declared a quarterly dividend at the increased level of 7.5 cents per share which will be paid at the end of May. The board will review Caledonia’s future dividend distributions as appropriate while considering the balance between delivering returns to shareholders and pursuing the significant growth opportunities within Zimbabwe and in line with a prudent approach to financial management.”
[1] Gross profit is after deducting royalties, production costs and depreciation but before administrative expenses, other income, interest and finance charges and taxation.
[2] EBITDA is after deducting royalties, production costs and administrative expenses, but is before depreciation, net other income, profit on sale of a subsidiary, net foreign exchange gains, cash-settled share-based payments, hedging expenses, finance charges and taxation.
[3] Non-IFRS measures such as “On-mine cost per ounce”, “all-in sustaining cost” and “adjusted earnings per share” are used throughout this announcement. Refer to section 10 of the MD&A for a discussion of non-IFRS measures.
