Caledonia Mining earnings slip in difficult first quarter

updated: 13 May 2021 at 3:38pm Author: Josh White

(Sharecast News) - Caledonia Mining reported gross revenues of $25.7m (£18.3m) in its first quarter on Thursday, up from $23.6m year-on-year.
The AIM-traded firm said the higher revenues reflected a higher realised gold price, offset by lower sales due to lower production.

Revenues included the sale proceeds of 1,584 ounces of gold in work-in-progress, brought forward from 2020.

Its EBITDA, excluding net foreign exchange gains and the export incentive credit, came to $9.5m for the three months ended 31 March, down from $9.8m a year earlier.

On-mine costs totalled $836 per ounce, up from $702 per ounce year-on-year, with the increased cost per ounce put down to a lower grade and lower recoveries; with cost per tonne milled increasing by 4%.

Normalised all-in sustaining costs, excluding the effect of the export credit incentive and its successor scheme, came to $1,077 per ounce, rising from $904 per ounce in the prior year.

Adjusted earnings per share totalled 51.6 cents, down from 57.3 cents, and net cash from operating activities slid to $2m from $10.1m.

Cash from operations was adversely affected by increased working capital, in particular higher amounts due for gold sales, which were settled in full after the end of the quarter.

Responsibility for making payments for gold deliveries from the Blanket Mine had now moved from the Reserve Bank of Zimbabwe to its gold refining subsidiary Fidelity Printers and Refiners.

Caledonia said it believed the move would "simplify and improve" the mechanism for receiving payments for the gold it produced, with the new system said to be operating well.

Net cash and cash equivalents at period end totalled $13m, down from $13.8m, as the company paid a dividend of 11 cents per share in the quarter, which was 46.7% higher than in the first quarter of 2020.

The company noted that the proportion of dollar-denominated revenue that it was required to surrender for local currency had increased to 40% from 30%, which it had accommodated by increasing its local currency-denominated expenditures and by participating in the weekly foreign currency auction.

On the operational front, Caledonia produced 13,197 ounces of gold in the quarter, down from 14,233 ounces year-on-year, with production adversely affected by underground flooding and lower grades.

Its grade came in at 2.98 grams of gold per tonne, down from 3.35 grams per tonne a year earlier, with the board saying the 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 was now operational, the company confirmed, while the 12MW solar project was now in the procurement phase, and was expected to be operational within the next year.

"The first quarter of 2021 raised several challenges which I am pleased to say have now rectified," said chief executive officer Steve Curtis.

"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, Curtis said the firm increased its pumping capacity so it could manage any repetition of that event in the 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."

Curtis said Caledonia's immediate strategic focus was to convert the commissioning of the 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."

At 1448 BST, shares in Caledonia Mining Corporation were up 0.96% at 1,050p.