Caledonia Mining Corporation Plc (LON:CMCL) has announced its operating and financial results for the quarter ended March 31, 2021. Further information on the financial and operating results for the Quarter can be found in the Management Discussion and Analysis and the unaudited interim financial statements which are available on the Company’s website and which have been filed on SEDAR.
Financial Highlights
· Gross revenues of $25.7 million (Q1 2020: $23.6 million). Higher revenues reflect a higher realised gold price offset by lower sales due to lower production. Revenues include the sale proceeds of 1,584 ounces of gold in work-in-progress brought forward from 2020.
· EBITDA excluding net foreign exchange gains and the export incentive credit of $9.5 million (Q1 2020: $9.8 million).
· On-mine cost[1] of $836 per ounce (Q1 2020: $702 per ounce). Increased cost per ounce was primarily due to a lower grade and lower recoveries; cost per tonne milled increased by 4 per cent.
· Normalised all-in sustaining cost1 (excluding the effect of the export credit incentive and its successor scheme) of $1,077 per ounce (Q1 2020: $904 per ounce).
· Adjusted earnings per share1 of 51.6 cents (Q1 2020: 57.3 cents).
· Net cash from operating activities of $2.0 million (Q1 2020: $10.1 million).
o Cash from operations was adversely affected by increased working capital, in particular higher amounts due for gold sales – these have been settled in full after the end of the Quarter.
o Responsibility for making payments for gold deliveries from the Blanket Mine has now moved from the Reserve Bank of Zimbabwe (RBZ) to its gold refining subsidiary Fidelity Printers and Refiners (Private) Limited (Fidelity). Caledonia believes this move will simplify and improve the mechanism for receiving payments for the gold it produces and is pleased to report that the new system is operating well.
· Net cash and cash equivalents of $13.0 million (Q1 2020: $13.8 million).
· Dividend paid in the Quarter of 11 cents per share, a 46.7 per cent increase from Q1 2020.
· Changes to the proportion of dollar-denominated revenue that we must surrender for local currency, increased from 30 per cent to 40 per cent. We have accommodated this change by increasing our local currency denominated expenditures and by participating in the weekly foreign currency auction.
Operating Highlights
· 13,197 ounces of gold produced in the Quarter (Q1 2020: 14,233 ounces). Production was adversely affected by underground flooding and lower grades.
· Grade of 2.98g/t (Q1 2020: 3.35). Grade was low due to a fall-of-ground problem in a high-grade area.
· The Central Shaft was commissioned at the end of the Quarter and is now operational.
· Total injury frequency rate for the first quarter was 0.79 compared to 0.97 for 2020. Blanket mine achieved 1,857,844 fatality free shifts as at end of the Quarter.
· The 12MWac solar project is now in the procurement phase and is expected to be operational within the next 12 months.
Post Quarter-End Highlights and Outlook
· Quarterly dividend increased by 9 per cent to 12 cents per share in April 2021, a 75 per cent cumulative increase from the level of 6.875 cents since October 2019. This increased dividend is due to Caledonia’s enhanced outlook following the commissioning of the Central Shaft at the end of the Quarter.
· A strong recovery in production in April: 5,470 ounces were produced in April which is above plan and 24 per cent higher than the average monthly production in the Quarter.
· 2021 gold production guidance of between 61,000 – 67,000 ounces.
· Cash balance at April 30 of $16.3 million.
Steve Curtis, Chief Executive Officer, commented:
“The first quarter of 2021 raised several challenges which I am pleased to say have now rectified. The fall-of-ground at AR South has been resolved and this high-grade area is back in full production. The underground flooding which resulted in five lost production days was caused by exceptionally heavy rains; rainfall in the first quarter was more than two-and-a-half times higher than the average for the same period in previous years. In response, we increased our pumping capacity so that we can manage any repetition of this event in future. On the positive side, the heavy rain means that water supply, which has sometimes been a cause for concern, is assured for the foreseeable future.
“Gold production in April show a marked improvement and Blanket produced 5,470 ounces in April, which is better than planned. The strong recovery in performance has continued into May and we are confident that we will achieve our full year guidance of between 61,000 and 67,000 ounces.
“Operating costs were well controlled with the increase in the on-mine cost per ounce predominantly due to lower grades and recoveries, which has now been addressed. The cost per tonne mined increased by only 4 per cent in the Quarter compared to the first quarter of 2020 and this was due largely to increased usage of diesel generators because of continued grid supply problems. Given the high fixed cost base, I expect that costs per ounce will reduce as production increases.
“Early in the Quarter the proportion of dollar-denominated revenue that we must surrender for local currency increased from 30 per cent to 40 per cent. We have accommodated this change by increasing our local currency denominated expenditures and by participating in the weekly foreign currency auctions. We are not accumulating excessive local currency balances which we are unable to convert into hard currency and remit out of Zimbabwe.
“Responsibility for making payments for gold deliveries from the Blanket Mine moved from the Reserve Bank of Zimbabwe to its gold refining subsidiary Fidelity Printers and Refiners Limited. This move has simplified and improved the mechanism for receiving payments for the gold Blanket produces, which in the early months of 2021 had been subject to delays. Those issues have been fully resolved with full catch up of delayed payments and Caledonia is pleased to report that the new system is operating well. We have a strong, long-term working relationship with the Reserve Bank of Zimbabwe and Fidelity and are delighted that they have improved the payment process.
“As a result of the normalisation of working capital and helped by the higher production in April, our consolidated cash position improved from $13.0 million at the end of March to $16.3 million at the end of April.
“We are delighted to have commissioned the Central Shaft at the end of the Quarter. The shaft is now hoisting waste material arising from the final development to connect the shaft to the production areas. This has relieved pressure on the Number 4 Shaft which can focus on hoisting ore until Central shaft takes over this role later in the year. The commissioning of Central shaft means that, despite the slow start to the year, we are confident we will achieve our production guidance for 2021 of between 61,000 to 67,000 ounces and 80,000 ounces per annum from 2022 onwards.
“We increased the dividend for the fourth time at the start of January to 11 cents a share and we increased it again to 12 cents per share in April. This is a 75 per cent cumulative increase from the level of 6.875 cents since October 2019, creating genuine value and returns for our shareholders.
“In December we announced that we had entered into option agreements on two properties, Glen Hume and Connemara North, in the Gweru mining district in the Zimbabwe Midlands. These options give us the right to explore each property for periods of 15 and 18 months respectively. If our exploration is successful these properties will add further impetus to our growth. We have made good progress on the drilling campaign at Glen Hume and we are evaluating the results of the first phase. At Connemara, where we have the benefit of evaluating historical drill data, we are preparing a geological model before we commence drilling this summer.
“Safety remains our primary concern, and I am pleased to report that the Quarter passed without serious incident. I am also delighted to note that the Central Shaft was commissioned at the end of the Quarter without serious accidents. This was a six-year project which involved sinking and equipping a shaft to a depth of over 1,200 meters. This activity is notoriously high-risk and it is a credit to all involved that we completed the project safely.
“We continue to take extraordinary measures to protect our workers and their families from COVID-19. To date, we have recorded 38 positive tests results amongst our 1,650 workers and their dependants at Blanket, none of whom required hospitalisation. We have also placed orders for vaccines for our workers and their families.
“Caledonia’s immediate strategic focus is to convert the commissioning of Central Shaft project into higher production, lower costs and increased cash generation. We will also finalise the exploration activities at Glen Hume and Connemara North while evaluating further investment opportunities in the gold and precious metals sector in Zimbabwe and in other jurisdictions, with our long-term vision of becoming a mid-tier, multi-asset gold producer.”
