Caledonia Mining’s Blanket gold mine, in Zimbabwe, delivered a “robust” performance for the fourth quarter and the year ended December 31, 2018, despite the well-known challenges of operating in Zimbabwe, CEO Steve Curtis indicated in a statement on Wednesday.
Curtis highlighted that the monetary environment in Zimbabwe became more challenging following changes in policy, although the general direction of policy development was considered to be positive.
Policy changes disrupted the commercial banking system in October 2018 and again in February, which adversely affected procurement.
Delays in procuring critical items meant that capital equipment suffered from a lack of maintenance, which increased the frequency of breakdowns.
“We are optimistic that the introduction of a market exchange rate in February will, in time, allow a return to normal operating conditions.”
The company’s costs in the year and the quarter were higher than expected owing to a combination of increased prices for cyanide and steel, the increased cost of a larger fleet of trackless equipment, which operates in the declines, and the adverse effect of lower-than-expected grades.
“Notwithstanding these challenges, the financial performance of the company remained robust. Net profit attributable to shareholders for the year increased from $9.4-million to $10.8-million. Cash generated by operations before working capital was $25.8-million for the year, compared with $26.8-million in 2017.”
However, Curtis informed that working capital increased by $4.7-million in the year compared with a reduction of $2.1-million in 2017 – with the increase attributed to an increase in amounts due in respect of gold sales and value-added tax (VAT) refunds from the Zimbabwe government and a reduction in trade and other payables.
Subsequent to the end of the year, Blanket has received all amounts owing as at December 31, 2018, in respect of gold sales and $1.2-million in respect of VAT refunds, which reflects all of the longer outstanding amounts owing.
Meanwhile, Curtis also highlighted good progress on the development of the central shaft at Blanket, which is anticipated to be operational in about 15 months’ time.
Curtis extolled that Caledonia was at “a very exciting” point in its development.
“At our current production level we are already highly cash generative. For the next 18 months, the bulk of the cash generation will be deployed to the investment plan at Blanket, which we are confident will further increase cash flows as we increase production to about 80 000 oz of gold in 2022.”
Once the investment plan is completed towards the end of 2020, the company expects to have considerable free cash flows to deploy elsewhere.
“Against this background, there are very encouraging developments in Zimbabwe which we are optimistic will create new investment opportunities.”