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Caledonia Mining ups stake in Blanket after central shaft excavation


Rising expected cash generation from 2020 expected

Caledonia Mining Corporation - Caledonia Mining into ramp-up phase as central shaft excavation completes

Quick facts: Caledonia Mining Corporation PLC

Price: 809 GBX

Market: AIM
Market Cap: £93.16 m
  • Caledonia Mining operates the Blanket gold mine in Zimbabwe

  • New central shaft at the mine has been sunk

  • Target is 80,000oz per year by 2022

  • Stake in Blanket now up to 64%


How is it doing

Blanket started production in 1904 and new shaft will take mining down to below the 1,200m level

Gross profits rose 75% to US$8.5mln in the three months to September helped by a rising gold price, though the devaluation of Zimbabwe's currency meant higher net profits but lower earnings per share. 

For the nine months of the year so far, profits jumped almost five-fold to US$39.6mln, which again reflected the swings in Zimbabwe's currency.

Cash holdings were US$8mln at the end of September.

Production guidance for this year has been trimmed to 50,000-53,000oz due to grade issues but Caledonia Mining PLC (LON:CMCL) remains “on track” for its target of 80,000 ounces by 2022. 

In January 2020, Caledonia completed the acquisition of an additional 15% stake to take its holding in the Blanket mine to 64%.

What the boss says: Steve Curtis, chief executive

Curtis said that the company is "certainly seeing" much-improved tonnage and grades throughout August, September, and continuing into October.

"The remediation efforts we've been working on are really starting to bear fruit", said Curtis reflecting on Caledonia's rebound from a tough first half of the year and "very severe electrical problems" across Zimbabwe.

In July Curtis also announced the completion of the shaft sinking at the Central Shaft, which he called a “major milestone" which "marks the successful culmination of five years’ work and approximately US$45 million of capital investment”.

Watch the interview:


Inflexion points

  • 45% production growth planned
  • Rising expected cash generation from 2020 expected
  • Strong future cash generation leaves resources available for strategic purposes: target-rich environment
  • All-in Sustaining cost guidance of $810/oz – $850/oz
  • Operating costs to move down as new shaft ramps up: due to increased production volume, economies of scale and better mine efficiencies
  • One of the highest dividend yields in the gold industry


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