14th Oct 2014 07:39
LONDON (Alliance News) - Caledonia Mining Corp Tuesday said its earnings for the full year will be "materially lower" than current market expectations, as it saw lower production at its Blanket Mine in Zimbabwe in its third quarter.
Caledonia saw 9,890 ounces of gold produced at Blanket in the third quarter to end-September, down from 12,042 ounces in the previous year and 11,223 ounces in the previous quarter.
The average head grade was lower than in previous quarter, and the tonnes mined and milled did not increase sufficiently to offset this, although plant recoveries have remained strong, Caledonia said. Its target grade for the year was 3.84 grams per tonne, and in the first half it saw a grade of 3.7 grams per tonne, which fell further in recent months.
As a result, Caledonia lowered its gold production guidance for the year to 40,000 ounces from 45,000 ounces. It produced 31,354 ounces in the first nine months.
Compounding this lower production was the continued decline of gold prices, and changes to the Zimbabwean taxation regime. These changes dictate that the 7% gold royalty payable to the Zimbabwean government is no longer deductible for the calculation of Zimbabwean income tax. However, Caledonia expects this to be partly mitigated by a lower gold royalty rate from October 1.
The company said it has been able to partly offset the lower production and gold price by reducing the cost per tonne of ore processed.
It is reviewing the medium-term capital investment programme at Blanket in hopes of improving grades and increasing tonnage throughput, by facilitating quicker access to deeper level resources. This revised programme will be finalised in the fourth quarter, it said.
Although it expects its earnings per share for the third quarter to be lower than previous quarters, and its earnings for the full year to be hit, it reiterated expectations of continuing its existing dividend policy of 1.5 Canadian cents per quarter in 2015.
Shares in Caledonia are trading down 11% at 51.25 pence Tuesday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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