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BLANKET Mine’s gross profit for the full year to December 2014 tumbled by 31,4 percent to $20,5million on reduced output which was mainly due to lower head grade, the company said on Tuesday.Canada-based Caledonia Mining, which owns 49 percent of the Gwanda gold mine, said output fell eight percent to 41,771 ounces from 45,527 oz in 2013. Gold sales went down 4,2 percent to 41,927oz for the year.

Quarter on quarter, the company said production fell 8,8 percent to 10,419oz in the fourth quarter compared to the same period in the prior year.

Profit also went down from $4,5 million to $4,4 million.

Caledonia chief executive 2014, Steve Curtis said 2014 was a challenging year because of the lower grade and reduced production levels.

“Despite the tough environment Caledonia still generated $3 million of cash and paid $3,2 million in dividends to its shareholders after $6,8 million was invested at the Blanket Mine,” he said.

“Blanket also achieved a creditable All-in Sustaining Cost of $969 per ounce of gold (2013: $973/oz) for the year albeit on 8,3 percent fewer ounces of gold production.”

He said towards the end of 2014, Caledonia announced a revised investment plan under which approximately $70 million will be invested at the Blanket Mine over the next seven years, with the objectives of doubling production and reducing costs and has an internal rate of return of 267 percent.

Implementation of the revised plan remains on track, he added.

“Caledonia’s cash generation in 2014 remained strong and Caledonia increased its net cash from $23,4 million to $26,8 million as at December 31, 2014,” said Curtis.

He said commercial environment in Zimbabwe continues to show signs of improvement.

“In Q4 of 2014 the royalty rate payable to the Zimbabwe government was reduced from 7 percent of turnover to 5 percent.  In early 2015 the discount payable on gold sales was reduced from 1.5 percent to 1.25 percent and the 2015 round of wage negotiations has been settled rapidly with an average increase agreed at three percent,” he said. — The Source