Caledonia to expand Zimbabwe operations Caledonia Mining Corporation

Nqobile Bhebhe, [email protected]

CALEDONIA Mining Corporation Plc has released its financial results from 2023 and also announced plans to expand its Zimbabwean operations.

The mining entity plans to establish itself as a multi-asset gold producer, with an ambitious goal to produce more than 250 000 ounces of gold per year.

Its immediate strategic focus will be on Blanket Mine, where it plans to produce between 74 000 and 78 000 ounces this year and conduct a revised resource statement to extend the mine’s life.

The acquisition of Bilboes in January last year was part of Caledonia Mining’s strategy to build a portfolio of high-quality gold assets in Zimbabwe.

Chief executive officer, Mr Mark Learmonth, said the performance of Blanket Mine remains robust and operating cash flows across the second-half of the year show a continuation of the improved operating performance compared to the first-half of last year.

“We continue to see Blanket as a solid foundation for growth as we pursue our strategy to become a multi-asset gold producer,” he said.

“At a consolidated level, group profitability for the quarter was adversely affected by several unanticipated one-off costs, and by higher than expected labour and power costs.

“Management has taken steps to address these and is evaluating measures to reduce electricity consumption and improve labour efficiency.

Gold sales in the quarter exclude 3 057 ounces of gold that were held as work-in-progress as at December 31, 2023, and which were sold early in January 2024.”

Mr Learmonth said they are encouraged by the results from the underground exploration programme at Blanket and they expect to publish a revised resource statement in the second quarter of this year.

“We are highly encouraged by the results from the underground exploration programme at Blanket which we restarted during the year; in general, the drilling results, which we announced in July 2023 and January 2024, indicated significantly better widths and grades than previously modelled and we expect to publish a revised resource statement in the second quarter of 2024 which should incorporate an increase in Blanket’s Mine life.

“Caledonia’s vision has evolved over the last couple of years from being a relatively small operator of a single asset towards a strategy focused on becoming a multi-asset, Zimbabwe focused gold producer with an ambition to produce over 250 000 ounces of gold per annum.

“The acquisition of Bilboes in January 2023 builds on the earlier acquisitions of Motapa and Maligreen to create a portfolio of high-quality exploration and development assets in Zimbabwe.

“I look forward to announcing the results of the updated feasibility study for the Bilboes sulphide project soon   and firmly believe that we have the potential to create and deliver greater shareholder value from the future inclusion of this project in our production profile.”

Revenue in the quarter was 13,1 percent higher than the last quarter of 2022 due to a 0,9 percent increase in the quantity of gold sold and a 12,2 percent increase in the average realised price of gold sold.

Revenue for the year was 3 percent higher than in 2022 due to a 7,8 percent increase in the average realised price of gold sold, offset by 4,4 percent lower oz sold in the year compared to 2022.

Finance costs paid in the quarter and the year increased due to overdraft interest of US$0,7 million in the quarter and $1,7 million in the year (Q4 2022: US$0,1 million; 2022: US$0,2 million) to accommodate working capital fluctuations at Blanket.

In addition, finance costs for the year included interest of US$600 000 related to the Motapa loan notes that were fully repaid on July 3, 2023.

Blanket’s Q4 production costs increased due to the higher than anticipated use of electricity arising from the continued heavy use of infrastructure at the No 4 Shaft and Jethro Shaft.

“These will be used more sparingly going forward following the commissioning of the Central Shaft.

“Electricity usage is expected to reduce in 2024 and 2025 as Blanket transitions from the old mine infrastructure and mining activities become centralised in areas accessible by the Central Shaft. Management is reviewing the timing of closing down other shafts and machinery and using infrastructure more efficiently to reduce future power consumption.”

The firm noted that the poor quality of electricity supply from the national grid is the most significant production risk at Blanket.

“In Q4, Blanket’s power supply from the grid was interrupted due to an imbalance between electricity demand and supply.

“Management is investigating options to alleviate the instability in the utility supply and further reduce the cost of diesel generator usage to supplement low voltage occurrences and power outages. Further work is in process to reduce Blanket’s overall electricity consumption by utilising the available shafts and machinery more efficiently.”

Administrative expenses in the quarter were 43 percent higher than the comparative quarter predominantly due to increased salaries and wages.

Administrative expenses in the year include a one-off fee of US$3,1 million paid for advisory services on the conclusion of the Bilboes acquisition in January 2023.

Due to the oxide mining activities at Bilboes incurring losses, it returned to care and maintenance with effect from October 1, 2023, following which the costs at Bilboes reduced from approximately US$1 million per month to US$200  000 per month, being the costs of security and other care and maintenance costs.

The ongoing underground drilling programme at Blanket targeted the Eroica, Blanket and AR south ore bodies and has yielded encouraging results.

Total drilling for 2023 was 13 280 metres and the results indicate that the existing Blanket, Eroica and AR South ore bodies have grades and widths which are generally better than expected.

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