Caledonia Mining Corporation Plc COM SHS NPV (DI) (LON:CMCL) Chief Financial Officer Mark Learmonth caught up with DirectorsTalk to discuss their latest production update
Q1: Now Mark, you issues a production update today, can you talk us through the highlights?
A1: Yes, it’s very straightforward really. We’ve just announced our Q3 production update, we’ve achieved 13,430 ounces of gold in the quarter so that’s 23% higher than the comparative quarter, so that’s Q3 of 2015, and 7.5% higher than the previous quarter of 2016 when we did about 12,500 ounces, that’s good, there’s no doubt that’s a good performance but it is exactly what we said we were going to do so. At the beginning of this year we said we’d aim for 50,000 ounces for the year and that would be pretty much 11,000 in the first quarter, 12,000 in the second, 13,000 in the thirds and 14,000 in the fourth and we sort of a couple of hundred ounces ahead of that so we’re absolutely on target to deliver the 50,000 ounces this year and then next year we’re looking at 60,000-65,000 so there should be no surprises which is all good news.
Q2: Your new mill has just been installed and you’ve said the commissioning process is proceeding as anticipated, what’s actually involved in the commissioning process?
A2: The mill is a big lump of iron fabricated interestingly, and quite pleasingly, made in Bulawayo in Zimbabwe so we were supported local engineering company and there used to be some very high quality engineering companies in Zimbabwe, they’ve been a bit degraded because the economy’s deteriorated but it was very pleasing to be able to get a good bit of kit made locally. That has now been shipped to the mine on a lorry, it’s been put onto the foundations that have been there for some time and then the process then is sort of plumbing it into the system so sort of getting the conveyor belts to deal with the stuff going into it and the means of getting it out of the mill and into the rest of the plant. So it’s all been plumbed in and now it’s really just a process of dealing with any little teething issues but at this stage there are no significant teething issues and it’s all going as planned. This mill is important because it’s the only remaining bottle neck to us achieving the target production of 80,000 ounces by 2021 so until this mill was installed we were pretty much running at our maximum milling capacity of about 1,500 tonnes a day, sometimes we were doing a little bit more, so it now means that that daily milling capacity has increased to 1,800 tonnes a day which is exactly what we need to be able to achieve that 80,000 ounces. So it removes that bottle neck, it means we don’t have to push the plant too hard and it’s all fine, it’s all as planned.
Q3: Finally then, what should investors be looking for in terms of news flow over the coming months for Caledonia Mining Corporation?
A3: Ok, well we’ll be announcing our Q3 results in the middle of November and because Q4 is a full year end that typically comes out the end of March so there is a bit of a longer gap before investors really see what’s happened in Q4 and for the year. What you should be seeing is as we’ve increased production clearly the revenues will go up because higher ounces produced and sold, the gold price has been somewhat higher, although it’s not today, so you’ll see higher revenues. I’ve always said we expect our costs to fall as we increase production because the fixed cost base at Blanket is quite high, and that included the fixed cost base at the top company being completely fixed, so as you produce more ounces and sell more ounces the average cost of production comes down so you get the benefit of producing and selling more gold at a lower average price so you should be seeing profit going up and cash flow going up. That’s what we’ve already seen quarter on quarter so far in 2016 and I expect to see that continue for the remainder of 2016 and into 2017 so investors can sit there and watch that.
