Caledonia Mining Corporation (LON:CMCL) Chief Financial Officer Mark Learmonth caught up with DirectorsTalk for an exclusive interview to discuss their Quarter 2 results
Q1: Quarter 2 results out today, can you talk us through the highlights of the last quarter?
A1: Quarter 2 was a hard work quarter, we implemented the revised investment plan which will take us from where we are at the moment producing about 10,000 ounces per quarter up to, eventually by 2021, producing about 20,000 ounces a quarter. So let’s be very clear, where we are right now isn’t particularly where we want to be but we’ve got a plan to get us from where we are to where we want to be and we’re busy implementing that. The production results and all that sort of stuff for the 2nd quarter was exactly as we’d planned and we can talk about that in more detail. The highlights of the quarter were we upgraded our resource base, we put out an announcement in the middle of May which showed a significant improvement in our upgrade to our reserve resource base, taking some inventory from infill resource and measured and indicated, which is always good news. I guess it’s not highlight for the people concerned but we executed the closure of the office in Zambia which finally draws a line under our continued activities in Zambia which was costing us $1 million a year to just to stand still. We took the decision late last year to withdraw from Zambia and then it took 4-5 months to actually implement that in terms of closure and achieving those costs. I think what’s important is having taken the decision to exit Zambia, we’ve now implemented that and achieved those costs savings which is actually good timing in terms of actually getting those cost savings in the bank now, right now at a time when the gold price looks to be a little bit weaker. So as I said, it may not highlight the guys concerned but I think in terms of prudent management of the business, quite timely.
Q2: You mentioned implementing the revised plan, how are you getting on with that and have you hit any milestones?
A2: It’s going very well. So in the quarter we did hit 2 significant milestones, in tune we’ve completed the Tramming Loop which is a circular underground haulage facility, it’s 750 metres below surface. It’s housekeeping, it allows us to move more material underground so we can continue to maintain ore production and now in addition we can do more development work which means in due course, we should be able to see increased mining flexibility and slightly higher production that we initially expected, which is good news. So that was completed slightly ahead of the timeframe we’d expected and also slightly below budget so both of those are good news. Probably more significantly, we’ve finished the sinking of the No.6 Winze which is a sub-vertical shaft, we finished sinking that in quarter 2 and we’re now busy equipping that shaft which will probably take us until the end of August into September. Once we’ve done that, we can start doing the development towards the ore body that we’re going to be targeting with a view to commencing initial production on that from January next year, which again is on plan so that’s all good. The main event is clearly sinking the Central Shaft which is a brand new 6 metre shaft from the surface down to just below 1,000 metres below surface. Again, we’re making good progress on that and I think what’s interesting there is that we now seem to be picking up good, high quality, used equipment which we don’t need to use all that immediately, we’re buying it now whilst we’re getting it at such good prices as some of the gold mines in south Africa are entering distress so we’re actually managing to get our hands on good stuff at rather cheaper prices that we were expecting which is also good news. So yes, all going as planned.
Q3: So successful quarter 2, what does the next quarter look like for the company?
A3: Well the next quarter is more of the same. Production may be somewhat higher in the 3rd quarter and the 4th quarter, just because there are slightly more working days. We’re pretty much expecting things to just continue as they are in terms of production, and we expect our costs to stay stable, even at the lower gold price the Blanket mine is still cash-generative. The rates of capital spend will increase significantly in quarter 3 and quarter 4, we’ve got orders in the pipeline and once the work’s been done, that will be delivered. So I would expect our cash position to weaken somewhat as the year goes on but we’ve got to spend the money to deliver the project so can’t deliver the project without spending the money so that’s all good news. So we’re very much continuing where we are and hopefully continuing to show good progress on sinking the Central Shaft and continuing to show good progress on the equipping of the horizontal development of the No.6 Winze so that we’re in a position to start to increase our production from early 2016 onwards. It’s going to be very important especially if the gold price continues to show weakness because of the incremental production selling by ounces but also bringing the average cost of production down which will become very important if the gold price continues to be weaker.
