Caledonia Mining reports mixed third quarter

Caledonia Mining reported a mixed third-quarter financial and operational performance on Monday, driven by fluctuations in gold production, rising costs, and encouraging exploration outcomes at its Zimbabwe-based assets.

The AIM-traded firm said revenues for the quarter reached $46.9m, bringing the nine-month total to $135.5m.

Despite a higher gold price, gross profit was impacted by increased production costs, specifically at the Blanket mine, where on-mine costs per ounce rose to $1,056 from $928 in the prior year.

The group's all-in sustaining cost per ounce also grew to $1,501, largely due to elevated labour and electricity costs, alongside share-based payment expenses linked to Caledonia’s share price increase.

Gold production at Blanket mine for the quarter was 18,992 ounces, down from a record 21,772 ounces in the same period last year, attributed to lower grades and reduced metallurgical recoveries.

The mine’s year-to-date production stands at 56,815 ounces, with Caledonia reiterating its 2024 guidance of 74,000 to 78,000 ounces.

However, the company revised its annual cost guidance upward to between $950 and $1,050 per ounce, reflecting inflationary pressures, while also implementing maintenance-related inventory increases to reduce potential production disruptions.

Caledonia's exploration initiatives yielded promising results at the Motapa project, adjacent to its Bilboes project.

Initial findings from diamond and reverse circulation drilling revealed significant gold mineralisation across a combined strike length of over nine kilometres, with notable high-grade intercepts in the Jupiter, Pluvious, and Mpudzi zones.

Those areas would undergo further drilling to determine open-pit resource potential.

The company also announced a conditional agreement to sell a 12.2MW solar plant for $22.35m, expected to yield a profit over the plant's $14.3 million construction cost.

Blanket mine would retain exclusive energy supply from the facility post-sale.

Additionally, Caledonia declared a quarterly dividend of 14 cents per share, payable on 6 December, as part of its ongoing dividend policy established in 2014, balancing shareholder returns with prudent risk management.

Caledonia said it remained focused on growth, with a feasibility study for Bilboes’ sulphide project underway and slated for completion in early 2025, while exploration efforts continued at Motapa.

“I am pleased to report that production for the quarter was in line with expectations and we remain on track to meet our production guidance for the year,” said chief executive officer Mark Learmonth.

“Regrettably, during the quarter we had a fatality at Blanket; I would like to extend our condolences to the family and friends of the deceased.

“We remain committed to improving our safety performance and delivering a zero-harm environment.”

Learmonth said the company was still exploring ways to reduce on-mine costs at Blanket - particularly the cost of electricity and labour where several initiatives were being implemented and further measures were under consideration.

“In parallel, we continue to carefully manage our cash flows and working capital, albeit we have made the strategic decision to accelerate investment in inventory levels during the quarter to support preventative maintenance initiatives and reduce potential production delays.

“This investment would have previously been scheduled for 2025.

“Our cash reserves have also been negatively impacted by the currency devaluation in Zimbabwe during the quarter.”

During the period, Mark Learmonth noted that Caledonia announced the signing of a conditional sale agreement to sell the subsidiary that owns the 12.2MWac solar plant that supplies power to Blanket, for $22.35m.

“Completion of the sale will return capital to Caledonia at a key moment in the company's growth trajectory while retaining the exclusive energy offtake, ensuring approximately 20% of Blanket's daily electricity requirement continues to be met by renewable power.

“Blanket remains a solid foundation for our growth profile in Zimbabwe; our exploration activities at both Blanket and Motapa continue to deliver encouraging results, playing to our future growth ambitions.

“We continue to progress the revised feasibility study for the Bilboes sulphide project with a focus on capital allocation and expect to complete this in the first quarter of 2025.”

Learmonth said the firm was also making “encouraging progress” towards identifying and implementing a funding structure for Bilboes, aiming to minimise equity dilution and optimise the uplift in net present value per Caledonia share.

“We are excited by this opportunity to evolve our business and expand our production profile, which we believe will generate significant long term shareholder value.”

At 1119 GMT, shares in Caledonia Mining Corporation were down 3.93% at 1,124p.

Reporting by Josh White for Sharecast.com.