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Caledonia Mining's profits double as production and gold price rise

Output totalled almost 12,800oz, up from 10,800oz, with costs US$30 per oz lower at US$659
picture of gold and dollars
Production and gold prices boosted Caledonia's first quarter

Caledonia Mining Corporation (LON:CMCL) doubled profits as production from the Blanket mine in Zimbabwe rose by 18% in the three months to March.

Output totalled almost 12,800oz, up from 10,800oz, with costs US$30 per oz lower at US$659 and sustaining costs down US$99 at US$857.

Steve Curtis, chief executive said: “As the Blanket Mine has demonstrated in the past, increased production results in lower unit costs as the fixed cost component is spread across more production ounces.

Caledonia also benefited from a higher gold price of $1,213 per ounce, which lifted earnings to 5.3c or 96% higher than a year ago.

The miner is in the middle of a major upgrade to 49% owned Blanket, with the Central Shaft to be taken down by around another 400m to 1,080m

"Once complete, I expect the Central Shaft to enhance the operating efficiency at Blanket as it will transform the existing underground infrastructure, reduce travel times for employees to get to mining areas, shorten the tramming distances and reduce the time required to hoist ore to surface", said Curtis.

“Our cash balance declined slightly from the 2016 year-end figure of $14.3m, due to significant capital investment during the quarter and the normalisation of Blanket's working capital.

“I expect that 2017 will be the final year of significant capital investment in the Central Shaft project,” he said.

Yesterday Caledonia adjusted its production target for 2017 to between 52,000 and 57,000 ounces to reflect the work on the Central Shaft.

On the mining background in Zimbabwe, Curtis said electricity supply is variable but foreign exchange availability has improved.

The export incentive credit introduced in 2016 contributed US$576,000 in the quarter.

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