Caledonia Mining Corporation [LON:CMCL], the AIM-listed Zimbabwe-focussed mining company, has had a good six months since we last wrote about it. The company published its results for 3Q24 and the nine-months to end-September today (11th November).
The dual-listed company (as reported Caledonia has a New York listing [NYSE:CMCL] said that it has achieved revenues of USD46.9m (GBP36.4m) for 3Q24 and USD135.5m for the nine months, which led to gross profit of USD19.3m in 3Q24, up 36.9% year-on-year as a result of higher gold prices and lower costs for the Bilboes oxide mine.
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However, per ounce on-mine costs were up nearly 14% y-o-y to USD1,056 due to lower volumes of ounces sold and a spike in production costs at the miner’s Blanket Mine. Across the group, Caledonia saw its all-in sustaining cost (AISC) for 3Q24 up y-o-y from USD1,268/oz to USD1,501/oz as the company sold less gold and saw its labour and energy costs increase. Caledonia also had to pay out an increased cash-settled, share-based payment as a result of the increase in Caledonia’s share price.
Caledonia Mining’s strong share price rally
The company’s shares opened the week at 1,150p, up 28% over one-year and up 18.6% over the year-to-date. The company has a market cap of GBP224.6m. Basic earnings per share for 3Q24 was 12 cents per share, down from 24.1 cents per share in 3Q23, with adjusted EPS at 26.2 cents per share.
Net cash from operations was USD4.6m, down from USD14.5m this time last year, again on the back of lower operating profits and higher foreign exchange profits, as the Zimbabwean dollar was devalued. The company also had to handle increased tax payments, because of a change in the frequency of payments, and increased working capital costs resulting from a build-up of inventory, spending on preventative maintenance costs and acting now to prevent future production delays.
That said, Caledonia declared a dividend of 14p per share, to be paid out on 6th December.
Caledonia did have one fatality during the quarter, a result of a rock fall at Blanket Mine. Management said: “Caledonia takes the safety of its employees very seriously and, accordingly, measures have been taken to reinforce adherence to prescribed safety procedures.”
Quarterly gold production was down from 21,722oz to 18,992oz, but the 21,000oz plus production was a record for Caledonia and in the past quarter the miner had to deal with a lower grade per tonne mined, and reduced metallurgical recoveries. Over nine-months Caledonia produced 56,815oz against 55,244oz produced in the equivalent nine-months of 2023.
The company is expecting to recover between 74,000oz and 78,000oz from Blanket Mine this year, albeit costs have increased at Blanket by up to USD80/oz to USD1,050/oz as a result of rising energy and labour costs. Previously Blanket was looking at production costs of between USD870/oz and USD970/oz, but Caledionia’s management has taken note of rising costs and is committed to bearing down on costs for the rest of the year.
Caledonia is managing cashflow and building-up inventory
Mark Learmonth, Caledonia’s CEO said in a statement to the market: “[…] we continue to carefully manage our cashflows and working capital, albeit we have made the strategic decision to accelerate investment in inventory levels during the quarter to support preventative maintenance initiatives and reduce potential production delays. This investment would have previously been scheduled for 2025. Our cash reserves have also been negatively impacted by the currency devaluation in Zimbabwe during the quarter.”
The company is on the verge of selling its solar energy company, which runs a 12.2MW plant. Management is expecting a USD22.4m windfall from the sale, USD8m of that as profit, and will retain the exclusive supply of energy from the plant which means that 20% of Blanket’s energy costs will be from renewable energy.
On an ongoing basis Caledonia is focusing on hitting its production target at Blanket and completing its feasibility study on its Bilboes sulphide mine, which should be delivered 1Q25 with the company working of a proposed financial structure for the mine construction that would be non-dilutive of existing shareholders and maintaining the share price’s positive momentum. The company is continuing its exploration at Motapa which has a historic production of 300,000oz of gold.
The company also today published an exploration update for Motapa, which Caledonia acquired two-years ago. The Motapa project is located next to Caledonia’s Bilboes Gold Project in southern Zimbabwe. Caledonia completed a drilling programme earlier in the year, cutting 12,724 metres of trenches, 4,143 metres of diamond drilling and 5,433 metres of reverse circulation which uncovered: “the presence of widespread gold mineralisation over a combined strike length of more than nine-kilometres,” said the company with especially strong results from three zones, which will receive further attention through a follow-up drilling programme.
Caledonia has delivered a solid performance for the third quarter of 2024, despite facing challenges such as increased costs and foreign exchange fluctuations. The company’s focus on operational efficiency, cost control, and exploration activities positions it well for future growth. With a strong balance sheet and a commitment to shareholder value, Caledonia remains an intriguing investment opportunity in the Zimbabwean gold mining sector.
