Caledonia to leverage on efficiencies
Victoria Falls Stock Exchange (VFEX) listed resources group, Caledonia Mining Corporation Plc is expected to cash in on its increased production efficiencies and maintain the earnings growth trajectory for the full year and going forward, according to analyst projections.
The group, which is parent company to Gwanda based gold producer – Blanket Mine – has set an annual production trajectory of 73 000 tonnes to 80 000 tonnes of gold on the back of increased milling capacity.
Stockbrokers IH Securities sees the group enjoying economies of scale going forward although outlook for global gold prices uptick remains slow.
“We expect that with increasing production, there should be further economies of scale to be reaped speaking to a lower On-mine costs and All-in-sustaining cost,” said IH in a review update for the resources group.
Caledonia successfully completed its VFEX listing process in December 2021 leaving it eligible to benefit from the incremental production initiative backdated to 1 July 2021.
Baseline production target for the mine has been set to 57,000 ounces annually with anything produced beyond that exempt from export surrender requirements.
The group is also expected to benefit from its cost cutting measures, for instance on energy cost.
“From the increased milling capacity, and current production trajectory our view is that the targeted 73,000-80,000 ounces for 2022 is achievable.
“Caledonia’s 12MW solar plant that is due for commissioning will absorb up to 27 percent of power costs,” said IH Securities.
During the half year to June 30, 2022, Blanket Mine’s gold production was 38,605 ounces, representing a 29 percent increase on same period last year as the central shaft programme matured following a five-year, US$64 million development phase.
During the second quarter, Blanket recorded a 20 percent increase to 20,091 ounces of gold, which was a new production record for any quarter.
Revenue for the period grew 21,39 percent to US$72,06 million in line with production and a marginal increase in average realised gold price to US$1,767 per ounce from US$1,844 per ounce during the same period in the prior year.
Production costs in the year review grew 14 percent year on year to US$28,86 million. The resources group remained in a cash positive position for the half year closing out at US$10,86 million.
Loans and borrowings for the period remained negligible as Caledonia financed all its operations using funds on hand and funds generated by its operations. The group has taken further steps into evolving into a multi-asset holding company with the recent acquisition of Bilboes Gold subject to certain conditions.-ebusinessweekly
