Caledonia Mining reaches record annual gold production

Caledonia Mining reported record annual gold production in an update on Friday, of 80,775 ounces, exceeding the top end of its guidance and achieving its long-standing production target.

The AIM-traded firm said 2022 production represented a 19.7% increase on the 67,476 ounces it produced in 2021.

Quarterly gold production came in at 21,049 ounces, making for a 13.1% increase on the 18,604 ounces it produced in the fourth quarter of the prior year.

Looking ahead, the company said capital expenditure at Blanket in 2023 would include around $9.6m for a new tailings facility, as a result of tightened regulatory requirements, and a further $9.8m of deep-level capital development so that operations could be maintained in future years.

It said it expected that around $2m would also be incurred this year in the preparation of a revised feasibility study for the larger sulphide project at Bilboes.

The company said it anticipated that the cost of the projected capital expenditure for the group would be met from operating cash flows and in-country borrowings.

“In 2014, Caledonia announced a plan to sink a new shaft - Central Shaft - to 1,200 metres from surface, all funded through internal cash flow, with a long-term target of achieving an annual production rate of 80,000 ounces,” said chief executive officer Mark Learmonth.

“I am delighted to announce today that we have now achieved this target, with 2022 annual production of 80,775 ounces - just over the top end of our guidance.

“This achievement is a huge milestone for the company - it has been a tremendous team effort and I would like to thank all of our employees for their continued hard work.”

Learmonth said the firm’s production guidance for 2023 assumed that Blanket would “broadly maintain” the production rate achieved in 2022.

“2023 guidance also includes the estimated production from the small oxides project at Bilboes where mining activity is expected to commence in February, and we expect to extract gold from the heap leach process in March.

“Cost guidance at Blanket and Caledonia - excluding the costs of the Bilboes oxides project - is consistent with the costs we have historically incurred.

“We anticipate that the inflationary pressures currently being experienced by most mining companies will be offset by efficiencies resulting from the successful implementation of the Central Shaft.”

At the consolidated level, Mark Learmonth said the all-in sustaining cost per ounce was also expected to benefit from the lower cost of electricity due to the recently-installed solar plant.

“The on-mine cost of the small oxides project at Bilboes reflects the low grade of the oxide material.

“The oxides project is not expected to be representative of the much larger sulphide project at Bilboes in terms of grade, production levels or cost profile.

“Nevertheless, the oxides project is expected to contribute to the group's cash generation whilst at the same time allowing us to pre-strip to the deeper sulphide material.”

Learmonth said that over the last 18 months, the company had built an “attractive portfolio of assets”, with the acquisitions of Bilboes, Motapa and Maligreen.

“Blanket will continue to serve as a solid foundation for this growth, as we look to progress our assets with our long-term goal of becoming a multi asset gold producer.”

At 1600 GMT, shares in Caledonia Mining Corporation were up 2.167% at 1,185p.

Reporting by Josh White for Sharecast.com.