12th Nov 2015 11:47
LONDON (Alliance News) - Caledonia Mining Corp Thursday said all its key metrics went the wrong way in the first nine months of 2015, with earnings, revenue and commodity prices all falling whilst its costs rose.
However, the company started to see some improvements in the third quarter of the year as the benefits begin to come through from its revised mine plan for the Blanket mine in Zimbabwe, with the real impact from that revised plan set to come through from the start of 2016.
Caledonia's adjusted earnings per share in the first nine months of 2015 fell to 10.2 cents from 10.5 cents a year earlier, with cash from operating activities also dropping to only CAD6.8 million from CAD11.5 million a year ago.
Gold production dropped to 31,288 ounces from 31,354 ounces a year ago whilst gold sales decreased to 32,102 ounces from 33,323 ounces, compounded by its margin being squeezed with higher costs and lower gold prices.
Caledonia's all-in sustaining cash cost in the first nine months of the year rose to USD993 per ounce whilst gold prices dropped to an average of USD1,159 per ounce compared to a year ago when its costs came in at only USD908 per ounce with gold prices much higher at USD1,262 per ounce.
The squeeze to its margin led to its gross profit dropping to CAD12.3 million in the first nine months of the year from CAD16.0 million a year ago, whilst net profit fell to CAD3.6 million from CAD5.4 million.
Caledonia also said its cash balance fell to CAD19.6 million at the end of September from CAD26.9 million a year earlier.
The only figure to go in the right direction since the start of 2015 was its royalty payments to the Zimbabwean government, which only totalled USD5.4 million compared to USD9.7 million a year ago. However, that was the result of lower gold prices and lower profitability in dollar terms, it said.
Although all of its financial and operational metrics were down over the nine month period, the company's third quarter results fared a little better as the benefits of its revised mine plan implemented earlier in 2015 begin to take effect.
"In the quarter to September 30, 2015, we began to see the benefits of the revised investment plan at Blanket mine, which we presented to investors in November 2014," said Steve Curtis, president and chief executive of the company.
Adjusted earnings per share in the third quarter of 2015 rose to 5.0 cents per share from only 2.0 cents per share a year earlier, but its cash from operating activities dwindled to only CAD900,000 from CAD3.6 million a year earlier.
Third quarter gold production rose year-on-year to 10,927 ounces from 9,890 ounces whilst sales rose to 10,927 ounces from 9,890 ounces. However, the increase in production and sales was more than offset by rising costs and lower gold prices.
"The first element of the revised investment plan, the tramming loop at the 750 metre level, was completed in June 2015 following which Blanket increased its mining activity to a record level. The record level of mining activity contributed to the 10% increase in gold production compared to the third quarter of 2014," said Curtis.
Its all-in sustaining cash cost soared to USD1,011 per ounce with an average gold price of only USD1,106 - almost completely wiping out its margin. That compares to a cost of USD952 per ounce with a gold price of USD1,252 per ounce a year earlier.
That led its third quarter gross profit to fall to CAD3.7 million from CAD4.3 million, but its net profit was still up at CAD1.7 million from CAD1.1 million.
"The average realized US dollar-denominated gold price in the quarter was lower than previous quarters following the sharp fall in the gold price in July. Notwithstanding the lower gold price, net profit attributable to shareholders in the quarter was higher than the previous four quarters," said Curtis.
Its royalty payments to the government in the third quarter dropped to USD1.8 million from USD3.1 million.
"The next element of the revised investment plan is the No. 6 Winze which will start production in the first quarter of 2016, and will provide access to resources below 750 metres. This will allow Blanket to increase production progressively in 2016 with a full year target for 2016 of 50,000 ounces," said Curtis.
Caledonia shares were up 1.1% to 42.70 pence per share on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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