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Caledonia Mining ups revenues despite gold price slide

Last updated: 14:48 12 Nov 2015 GMT, First published: 07:48 12 Nov 2015 GMT

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Caledonia's mining activity hit record levels.

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Higher production enabled Caledonia Mining (LON:CMCL TSX:CMCL) to raise revenueshttps://images.intellitxt.com/ast/adTypes/icon1.png and keep profits stable in its latest quarter despite the volatile gold price.

The miner’s 49%-owned Blanket mine in Zimbabwe produced and sold around 10,900 ounces in the three months to September, 10% higher than a year ago

Caledonia is in the middle of an underground development programme at Blanket, but in spite of this, and lower grades, output rose as the amount of ore milled rose 18% to hit record levels.

Revenues for the three months rose 17% to C$15.8mln, though a US$150 per ounce drop in the gold price meant pre-tax profits were flat at C$2.95mln (US$3mln).

Net profits rose to C$1.7mln due to currencies and lower taxes, while cash held at the end of the period amounted to C$19.6mln.

Adjusting for currency movements, costs per ton also fell by 7% said Steve Curtis, chief executivehttps://images.intellitxt.com/ast/adTypes/icon1.png, which reflected good progress underground at Blanket, with the tramming loop complete and work now getting underway on the No 6 Winze.

This will allow access below 750m and enable production to rise throughput 2016 towards a target of 50,000 ounces.

Production in the current year is on track or around 42,000 ounces.

“Caledonia's cash position remains robust and gives us the confidence to continue to investhttps://images.intellitxt.com/ast/adTypes/icon1.png in Blanket,” he said, adding the company will also carry on paying a quarterly dividend of C1.5c

Caledonia did point to a drought in Zimbabwe that may affect electricity output from the local Kariba Dam, but in that event the company's diesel generators would provide sufficient back-up power. 

WH Ireland said the results were encouraging given the massive investment into the Blanket mine in Zimbabwe in a lower gold
price environment, though it had trimmed its price target to 90p to reflect a lower gold price.

Sanlam added that once the underground development is complete, costs should be significantly lower at $800/oz or lower on a sustaining basis making Blanket highly cash generative.

Shares rose 1% to 42.7p.

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