Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) earlier this week provided an overview of its third-quarter performance and strategic initiatives.
Chief executive Mark Learmonth highlighted that production was steady at 19,000oz, aligning with annual targets.
Learmonth stated that measures are underway to significantly reduce these costs in the coming months. The company benefited from higher gold prices, contributing over $16 million in operating cash flow before working capital.
We take a closer look at what was said here.
Proactive: Mark, very good to speak with you. Could you take us through the highlights from the third quarter, please?
Mark Learmonth: Yeah. Thank you. Thanks for having me. Morning. You know, in production terms, the quarter was fine. We did about 19,000oz. So, we're on track to meet our production targets for the year, so that was fine.
The issues that arose in the quarter were ongoing costs at Blanket, which remain uncomfortably high, over $1,000 an ounce. This is driven by two main areas: electricity consumption, which exceeded expectations, and labor, where we continue to incur high overtime costs.
We're already addressing both issues, and I’d be disappointed if we can't significantly reduce these costs over the coming quarters.
In terms of cash flow, we benefited from a higher gold price, with operating cash flow before working capital at over $16 million.
This is comparable to last year's third quarter, which had higher production. However, we did face significant increases in working capital, including higher stock levels to enhance business resilience and increased receivables due to the higher gold price.
We also experienced another $2 million foreign exchange loss in the quarter, totaling $8 million for the year, which is a challenge when doing business in Zimbabwe.
Proactive: Mark, you've also published results from your exploration program at the Motapa Gold Project. What were the results, and what's next for Motapa?
Mark Learmonth: Yes, we acquired Motapa a couple of years ago, and this was our first phase of exploration. We completed 12,000m of trenching and nearly 10,000m of combined reverse circulation and diamond drilling, targeting a large sulfide resource and oxides.
We focused on four areas, three with historic mining activity and one new area identified through trenching. The results were encouraging, with grades of 5 to 6g per ton over 12-13m widths, and one drill hole showing 4m at over 11g per ton.
We're now assessing capital allocation for future drilling, aiming to leverage potential synergies with the adjacent Bilboes project.
Proactive: During the quarter, you announced the sale of the solar plant at Blanket. Why did you decide to sell it?
Mark Learmonth: We built the solar plant for $14 million, and while it was strategically important, we don't need to own it as long as we maintain access to power through our long-term, exclusive power purchase agreement with the buyer. Selling it for just over $22 million allows us to allocate capital more efficiently, especially as we invest in new projects.
The buyer is also considering further expansion, funded with their capital, which aligns with our strategic priorities.
Proactive: What are the next steps for developing the Bilboes sulfide project?
Mark Learmonth: There are two main focuses: completing the feasibility study, which we expect to publish in the first quarter of next year, and refining funding strategies, including combinations of senior debt, mezzanine debt, and a modest equity portion.
We have about three funding solutions taking shape, and so far, they are validating our internal projections.
Proactive: What are your priorities for Caledonia as we approach the end of 2024?
Mark Learmonth: The immediate priority is to reduce costs at Blanket and restore it to a low-cost operation. We also need to finalize the feasibility study on Bilboes and move forward with its development, securing credit-approved term sheets for funding.
Additionally, we must maintain exploration activities at Motapa to create a development horizon beyond Bilboes.