Caledonia earnings surge 86%

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Caledonia Mining Corporation reported an 86% increase in adjusted earnings per share (EPS) to 35,2 US cents in the quarter to June thanks to government’s export incentive and higher deferred tax adjustments.

By Staff Writer.

In an effort to spur exports, government introduced a 5% incentive scheme in May 2016.

Caledonia operates Blanket Mine in Gwanda.

Gold production in the quarter, at 12 657 ounces, was largely flat, in line with the previous quarter, as output was adversely affected by lower-than-planned tonnes and grade.

Higher production is anticipated in the second half of 2018.

“Grade for the quarter was 3,19g/t, this is below target due to difficulties in accessing broken ground at AR South and higher-than-expected dilution at the Blanket ore body due to the introduction of long-hole stopping on the grounds of safety,” chief executive Steve Curtis said in a statement accompanying quarterly results.

“Corrective measures to improve grade have been taken and it is expected that the grade and production tonnages will increase over future quarters, particularly in the fourth quarter of 2018”.

Cash generated by operating activities for the quarter was lower than in previous periods due to substantial working capital movements.

On-mine costs were up from US$696 per ounce in the previous quarter to US$717 per ounce due to increased labour rates, price of explosives and higher costs incurred on equipment used in the decline developments.

All in sustaining costs (AISC) were broadly stable at US$856 as the higher on-mine costs were offset by the increased export credit Incentive.

During the period under review the market price of gold averaged US$1 278.

Gross profit amounted to US$5,14 million, marginally higher than the previous quarter’s US$5,03 million, reflecting the higher gold sales and higher realised gold price, offset by the increased on-mine costs. As a result, net profitable attributable to shareholders increased from US$694 000 to US$2,6 million.

The firm reported a marked reduction in net cash from US$4,701 million to a negative US$1,21 million due to lower cash generated from operations, increased working capital and tax payments and high capital expenditure.

“Capital investment for the quarter was in line with our capex plan for 2018 at US$5,6 million, most of which was incurred at Central Shaft, which has now reached a depth of 1 106 meters. We expect capex to decline substantially after 2019 after we commission the Central Shaft as planned in 2020,” said Curtis. “We experienced significant negative working capital movements during the quarter which had an adverse effect on operating cashflow with a net operating cash burn of US$1,2 million during the quarter. This, combined with capital investment of US$5,6 million during the quarter, had a negative impact on the balance sheet with a net cash balance of US$5,3 million at the end of the quarter.”

The Central Shaft project is part of the company’s revised investment plan which is expected to extend the life of mine by providing access to deeper levels for production and further exploration.

Caledonia targets to achieve production of 80 000 ounces per year by 2021.

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