Proactive Investors - Run By Investors For Investors

Caledonia Mining predicts hit to 2019 earnings from monetary policy change in Zimbabwe

The estimated impact on earnings assumes a gold price of US$1,300 for the rest of year, the Blanket mine achieving the production guidance of 53,000 to 56,000 ounces of gold and no changes to operating costs
Caledonia
Zimbabwean miners received a premium to the international gold price under the previous policy

Caledonia Mining Corporation PLC (LON:CMCL) expects a US$5.4mln hit to 2019 earnings after the Zimbabwean central bank withdrew an export credit incentive (ECI) programme for gold producers.

READ: Caledonia Mining boosts quarterly gold production, looks ahead to 80,000 ounces in 2021

Under the ECI programme, Zimbabwean gold producers received a premium to the international gold price. The premium was initially set at 2.5% of gold revenues before rising to 10%.

The withdrawal of the programme is part of the central bank's decision to introduce a new currency, known as RTGS dollars, that can be used to make payments outside Zimbabwe.

The currency is made up of bond notes, coins and all electronic money and is aimed at reducing inflationary pressures in the country. 

"At this stage it is unclear whether this policy will address the increasing inflationary pressure in Zimbabwe by creating a transparent and efficient market exchange rate between RTGS dollars and dollars held in FCAs," Caledonia said. 

Caledonia said the Reserve Bank of Zimbabwe’s decision to remove the ECI programme would reduce earnings by 40 to 46 US cents per share.

The estimated impact on earnings assumes a gold price of US$1,300 for the rest of the year, the Blanket mine achieving the production guidance of 53,000 to 56,000 ounces of gold and no changes to operating costs.

View full CMCL profile View Profile

Caledonia Mining Corporation Timeline

Related Articles

Gold bars
November 27 2018
Panmure Gordon’s analysts noted that Ariana’s third-quarter update continued the trend of above plan production with its full-year 2018 guidance of 20,00 ounces almost reached in nine months
mineral drill rig
December 05 2018
The company published assay results from an extended 2018 drill program that confirm the Klyuchi West and Kozie areas are part of a 250-metre wide stockwork, extending 750 metres
A gold pour
February 19 2019
At the Santana project, the group s now awaiting final permit approval for commercial operations

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use