13th Aug 2015 08:57
LONDON (Alliance News) - Caledonia Mining has suffered a "difficult start" to 2015 after it was hit by rising costs, lower gold production and falling prices in the first half of the year which is set to extend into the third quarter, says Northland Capital Partners.
Caledonia said its gold production for the first half to the end of June was 20,361 ounces, down from 21,464 ounces a year earlier whilst sales in the half were down to 21,174 ounces from 23,433 ounces.
Gross profit for the group in the half was CAD8.6 million, down from CAD11.7 million, as its average gold sales price fell to USD1,187 per ounce from USD1,267 per ounce, tracking a fall in the gold price.
"The first half has been a difficult start to the year for Caledonia Mining Corporation with rising costs, lower gold production levels and lower realised gold prices squeezing margins," says Northland analyst Ryan Long. "With the gold price at its current level of USD1,119 per ounce, the third quarter is likely to continue to be difficult for Caledonia."
On a more positive note, the company's plan to increase production in 2016 via its expansion at the Blanket Mine located in Zimbabwe is set to also lower the company's all-in sustaining cash cost, in turn improving its profitability to combat the lower gold price environment, he says.
Although the results were not ideal, WH Ireland analyst Paul Smith said the results had "no surprises" with everything coming in as expected.
WH Ireland has a Buy recommendation on Caledonia with a target price of 95.0 pence.
Caledonia shares were up 3.6% to 43.0 pence per share on Thursday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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