Caledonia Mining Corporation share price, company news, analysis and interviews

Caledonia Mining Corporation plc (LON:CMCL) Chief Financial Officer Mark Learmonth caught up with DirectorsTalk for an exclusive interview to discuss highlights from their results, greatest achievements in 2021, update on Maligreen, other projects and the focus for the next six months.

Q1: Mark, can you just talk us through some of the highlights from the results?

A1: We’d already announced previously the production for 2021, which was a new record, just over 67,000 ounces, up from about 58,000 ounces last year so production was strongly up. Gold price didn’t move that much, marginal 1% movement, so that increased turnover by about 20 odd percent but gratifying the gross profit was up.

More importantly at the end of the day it’s cash and the cash flow before things like CapEx and working capital. So the real cash that we’re generating from the business that was about $50 million so about $1 million a week, which for a little mine in Zimbabwe is phenomenal. That translates into earnings per share increased from about $2 to $2.20 so a very good result.

Q2: It looks like Caledonia Mining’s had a good year. What do you think were the greatest achievements through the year?

A2: Undoubtedly, it was finishing the commissioning of the central shaft. The central shaft is a project we’ve been working on since early 2015, we’ve spent $80 odd million on this thing, it’s a brand new shaft for surface down to 1.2 kilometres. That was commissioned at the end of March in 2021 and we started using that shaft commercially in April and that’s contributed to the increase in production last year and will contribute to the further increase in production this year.

So, that was undoubtedly our biggest achievement in 2021.

Q3: Now, in Q4 you completed the acquisition of the mining claims at Maligreen. What are you currently doing there at Maligreen?

A3: Maligreen has got just under 1 million ounces of resources, mainly at the inferred level so what we’re doing right now is we are busy cutting and re-assaying the old core samples that are still existing with a view to improving that confidence level to a higher degree of confidence. At this stage, we’re not necessarily looking for a bigger resource base, we’re just looking for a better resource base. We should probably have some news on that that before the middle of the year, perhaps May/June. With a higher resource space then, we can then start turning our attention to how we would commercialise that.

Indicatively, resource space of that size should support an open pit operation of 50,000/60,000/70,000 ounces a year before we start looking for further material at depth and along strike and also in a quite an attractive new exploration area towards the north of the property.

So that’s a progress and hopefully the news flow will start flowing on that from mid-year onwards.

Q4: Are there any other projects that you’re looking at?

A4: Of course, yes, we’re always looking at projects in Zimbabwe. There are one or two that we believe we’re moving towards. Hopefully again, there will be some new flow on that towards the middle of the year.

I think we’ve said many times that we regard Zimbabwe as a highly perspective gold area and clearly being a substantial operator in country, we’re very well positioned to both identify opportunities and, subject getting the right pricing, to getting our hands on them.

So, yes, we’re very optimistic about our ability to grow further in Zimbabwe.

Q5: Just looking forward, what is Caledonia Mining’s focus over the next six months?

A5: The focus over the next six months is further increasing production of Blanket so last year we did 67,500 ounces, this year we’re looking for 80,000 ounces and that’s going very well.

We need to lock in that 80,000 ounces a year production level to further increase our cash generation which allow us then to spread our wings further, both financially and from a managerial perspective, looking at turning new opportunities to account.

Caledonia Mining Corporation plc (LON:CMCL) Chief Financial Officer Mark Learmonth caught up with DirectorsTalk for an exclusive interview to discuss purchasing the mining claims at the Maligreen project, why it’s such an exciting opportunity, the next steps in the project and looking at other opportunities.

Caledonia Mining is a profitable cash generative gold producer with a strong growth profile, Caledonia’s primary asset is the Blanket Mine in Zimbabwe. Today, the company has announced that it has entered into an agreement to purchase the mining claims over the Maligreen project, a property which is situated in the Zimbabwe Midland. Joining me to discuss the agreement is CFO Mark Learmonth.

Q1: Mark, It all sounds very exciting for the company. Can you just talk to the announcement that you made this morning?

A1: It is actually quite exciting, it’s an asset that we’ve been pursuing for several years now. As you’ve outlined, we’re paying $4 million to buy claims so we’re not buying a dirty companies or people’s liabilities or assets, we’re just buying the claims.

We’ve put ourselves in a position where we’ve been able to re-evaluate some of the quite considerable work that’s been done by previous owners so that we can say we’re spending $4 million of shareholders money to buy 940,000 ounces of inferred resource at a grade of nearly 1.9 grams a tonne. So that’s a meaningful size ore body, even now, and the grade is also quite attractive, 1.9 compares very favourably to the average open pit grid in the world, which I think is less than 1 gram a tonne.

What’s nice is that the bulk of the ore that we’ve identified is shallow enough to make it suitable for open pit mining so it’s a very exciting deal for us, and we’re very pleased that we’ve been able to land it.

Q2: What is it that makes Maligreen such an exciting opportunity?

A2: It’s the grade which is relatively high, it’s the ore body which is relatively shallow and the grade curve means that there’s quite a good deal of flexibility for future mine planning to accommodate a substantially lower gold price that might prevail at the moment.

So, effectively there is a high grade core and a fairly large lower grade area around that, which means that should the gold price fall substantially, we can focus the mining activities on a high-grade area and still make money out of it.

There’s that highly defensive characteristic, it’s got scale, as I say, it’s got grade and also, it’s got upside potential, both the depth and along strike, and in a completely separate area of the claim area that we’re buying up in the north.

So, it ticks all the boxes in terms of, it looks like it’s attractive for a relatively quick production, but also some legs to it both go to deeper extensions and new areas so it ticks all those boxes.

Q3: So, what will be the next steps for the project?

A3: The claims will get transferred so how long that takes, we don’t know, that might take a few weeks, it might take a month or so and we will then start drilling.

The initial objective would be to spend 18 months to two years, and about $1.6 million so that’s not a large amount of money to do what we’d term ‘confirmatory drilling’ to increase our confidence level of the existing resource base with a view to moving towards identifying what sort of mine we could build and then building it as quickly as we can.

So, that would be say 18 months to two years to do the drilling, 18 months to two years to get a mine together and then after that, do further drilling along the extensions and in the new areas with a view to either extending the mine life or even increasing the capacity, the size of any mine that we build.

That’s the plan going forward.

Q4: Are there any other opportunities that Caledonia Mining are looking at, at the moment?

A4: We continue to look for opportunities in Zimbabwe. This asset is one that we’ve really coveted for quite some time, there is one other asset that’s also in that category and hopefully we’ll get our hands on that, which we think is actually even more exciting.

We continue to look at things in Zimbabwe, actually at this stage probably to a lesser extent than stuff outside Zimbabwe so we do continue to look at things very much the same sort of size as what we’re looking at, absolutely.

Caledonia Mining Corporation plc (LON:CMCL) Chief Executive Officer Steve Curtis caught up with DirectorsTalk for an exclusive interview to discuss a record quarterly production, the Central Shaft, another increase in dividends and their planned growth strategy.

Q1: Caledonia Mining announced record quarterly production today, can you talk me through some of the highlights?

A1: We’re very happy with the results from the second quarter. It did come off a rather disappointing first quarter but that’s behind us so we don’t need to dwell on that.

So, the second quarter, we have surpassed the production levels that we’ve done for a second quarter on record which is excellent, it is more than 20% up on the comparative quarter.

It’s come about by achieving all the aspects of good mining. We’ve got the tonnes out, we’ve had good throughput through the mills, the grade has been slightly above what our budget was for the quarter which is excellent and our overall recovery in the milling and CIL section is virtually sport on.

The end result is that we are slightly above budget and recording about 16,700 ounces for a quarter which makes us very pleased and gives us nearly 30,000 ounces for the half year. That’s a good place to be considering our target for the full year is somewhere between 61,000 to 67,000 ounces so to be sitting at nearly 30,000 at this stage, after a disappointing first quarter, is a very good place to be.

So, I’m very happy with the results and very very proud of the guys at the mine who, again under difficult circumstances with COVID and various restrictions that are in existence, have produced a very very commendable production results so a good place to be.

Q2: Is the increase due to the commissioning of Central Shaft?

A2: Indirectly, yes because we’re not running the Central Shaft and the old Number 4 shaft. The Central Shaft at the moment is being used primarily for bringing waste material up as we become accustomed to using the equipment. The Central Shaft, if you remember, goes down to 1,200 metres where the old shaft only goes down to 750 metres.

So, what we’ve done is a lot of the development work that’s happening in what we call the new mine, which is below 750 metres, that development waste used to have to come up the old 4 shaft and obviously with restricted capacity there, the more waste you were hoisting, you had to sacrifice ore.

Now, we’ve got capacity on the Central Shaft and we are trucking more and more material to the Central Shaft, it’s freed up more capacity on the Number 4 shaft and the ore is coming up from there without the hindrance.

It’s working very well in combination as we get a mix of mining from various areas and various depths, having two shafts is definitely paying dividends for us and it’s a good place to be.

Q3: You also announced another increase in quarterly dividends, how many is that now that the company done?

A3: We’ve had six quarterly increases since the end of 2019. At that stage, the dividend had been flat at about 6.8 cents per share per quarter and now we’re up to 13 cents per share so it’s 85% increase in the dividend level so that’s very very encouraging.

We’ve moved the dividend up by 1 cent a quarter and it is very good to see we have got the cash, the gold price is good for us and the production is working well. The Central Shaft is completed so we’ve got capex to spend this year which is part of the budget but as we go forward, there will be a lower demand on the cash generated for capital items and the plan is working.

So, very happy to present and suggest to the Board another increase and for them to support it so we’re very happy to be abler to give a bigger return back to shareholders.

Q4: With the planned growth strategy post Central Shaft, will that affect the dividend in any way?

A4: Well, as we ramp up to 80,000 ounces in 2022, which is now only 6 months away, we are obviously going to be generating more cash out of Blanket operation and we’re going to start getting better economies of scale. Blanket will be able to distribute bigger dividends to its shareholders, Caledonia Mining being the 64% shareholder so there’s going to be more money available at the corporate level. There will also be, as we’ve indicated, more money allocated to other opportunities that we’ve embarked on, we’ve got two exploration properties.

The availability of cash is going to be much higher, gold price permitting of course, but our commitment has always been to reward shareholders and distribute more money to our shareholders.

So, everything being equal, we’ve indicated we’ve got a commitment to moving the dividend up and we’re going to moving up to a higher production level, good cost controls which I’m sure Blanket will do because it’s known for that.

So, we’re looking forward to having more cash in the coffer and we can make some serious decisions about dividends.

Caledonia Mining Corporation plc (LON:CMCL) Chief Executive Officer Steve Curtis caught up with DirectorsTalk for an exclusive interview to discuss the financial highlights from their Q4 results, why 2020 was transformational for the company, their response to COVID and what we can expect from them over the coming months.

Q1: Caledonia Mining announced quarter four results this morning, can you just take us through some of the financial highlights?

A1: 2020’s results, in through what all of us know was very, very difficult operationally because of COVID, but really they tell a fantastic story.

We hit £100 million turnover which was a 32% increase on the previous year, gross profit at £46 million was 50% up on the previous year, our adjusted earnings per share was 41% up at 204 cents a share and through the 12 month period, we’d increased our dividend four times and that accumulated to a 60% increase from the end of 2019.

So, all in all, yes, there was a good gold price but the mine delivered and that resulted in some very, very, very good financial results which we’re very proud of.

Q2: Operationally, why was 2020 transformational for the company?

A2: Well, we had the final equipping of our central shaft project which listeners may remember is a five-year old project and we finished equipping the shaft in the last quarter of 2020, which is fantastic, which allows us now to go into the commissioning stage, which is where we are right now.

We had to manage our way through the COVID pandemic and we had no outside management able to get to the mine. We instituted a hard lockdown and it just shows the resilience of the team that we’ve got up at Blanket who endured the lockdown, endured the pandemic, and produced a record production result of nearly 58,000 ounces.

So, it was transformational, it also showed that the strength of the training that we have put in, that culture has permeated into the organisation and that got us through and we’re very, very proud of that.

Right at the end of the year, we announced two options that we that we took out on exploration properties and this now brings action to our words of wanting to move on from being single asset business to a multi-asset gold producer so these are going to be exploration properties.

So, all in all, 2020 has taken us from a space of doing a project, to finishing a project, to embarking on an expansion programme so it’s been a great year for us.

Q3: Now, you did mention COVID, how was the company affected by COVID and what did you do in response to the pandemic?

A3: When you think about it, it started sort of this time last year for us in Zimbabwe, in South Africa. Through the year, effectively production was not affected, and as I’ve already said, we actually hit a record gold production of 58,000 ounces nearly and that’s just fantastic considering some of the restrictions that were placed upon us.

Our costs were a little bit higher because of the measures that we put in place to fight COVID and to protect our staff so we accept those increased costs happily. Staff discipline was really tested to the limit with hard lockdowns, that was hard for everyone while they were trying to worry about their families and continue doing a job so that was a massive challenge.

We did do, on a positive side, we managed to make some rather significant donations to the Chamber of Mines in Zimbabwe to assist them with their drive to help the nation fight with COVID so we were happy with that.

On our own doorstep, we focused on some CSR projects that were in our local area, that needed some help, especially during this difficult time. We spent time and money upgrading and improving schools and some medical facilities that had either been damaged, or that were just insufficient. The prime project there was we built an isolation centre for one of the clinics in the local area, we built a two-ward isolation centre with a new kitchen facility in a new ablution facility to just give the medical personnel in the area some resources and some structure to protect the community and to fight this COVID pandemic.

So, we were very happy that we could decide, execute, and deliver that while the COVID pandemic was raging on so tough year but the team came through with flying colours.

Q4: What can we expect from Caledonia Mining over the next few months?

A4: Considering where we’ve come, you kind of think is it time to sit down and take a break and a breather, and no, absolutely not.

Shaft commissioning will finish this quarter, just to remind people, the shaft is 1200 meters deep, four compartments, it’s going to run at two or three times the speed of the old shaft and much greater capacity. So, once Dana and his teams are finished doing the commissioning then he can operationalise that shaft so there’ll be some announcements around that.

As I’ve already spoken about, the exploration properties, the Glen Hume property is having drilling taking place on it as we speak, and we will continue to do that. Those two programmes are sort of between 15 and 18 months long so there should be some regular information coming out on those. Let’s remember, they are exploration, we are confident about them but they will be what they will be and we will do a proper exploration job there. The Connemara North project is really in the planning phase but Glen Hume is steaming ahead.

We’ll have Q1 results before we know where we are, Q1 has started off a little bit quietly in January and February but I’m pleased to say that March has picked itself up. There’s been some challenges, we’ve had absolute record rains in the area which is something we are not used to and we’ve had some operational challenges with excessive water.

We’re still very happy and we are still guiding that for 2021 our guidance is somewhere between 61,000 and 67,000 ounces so that’s an uptake on the 58,000-odd ounces that we did last year.

Obviously, we’ve got the solar project which we announced last year but that is now going ahead to a greater extent, detailed design is completed, the instruction to commence has been given to the contractors, COVID restrictions have been slightly relaxed so we are confident that that can now go full steam ahead. The site is cleared but now we need to get down to getting some of the kit and caboodle onto the ground and get building. It is going to take us probably 12 months from where we are now to get that into operation but that’ll be something that you’ll hear about over the next few months.

Very importantly, in the next two weeks, early early April, there’ll be another dividend declaration and as I’ve already said, we’ve already had a cumulative 60% increase. We’ve shown a willingness and an interest in increasing the dividends so I look forward to that dividend being discussed at the Board level and then announced to the market.

So, quite a lot coming up in the next few months and certainly 2021 is not going to be an idle year for us at all.