• Sun. May 26th, 2024

Caledonia shares flat despite return to profit

ByETimes

May 13, 2024

By ETimes

HARARE – Shares in gold miner Caledonia Mining Corporation traded flat at US$18.00 at the week’s opening, despite the Victoria Falls Stock Exchange-listed firm’s bounce back to profitability in the first quarter ended 31 March 2024.

C 1.JPGAs for financials, the gold miner recorded a profit of US$2.81 million in Q1 2024 from a loss of US$4,27 million in Q1 2023.

This positive turnaround in profitability reflects the company’s efforts to enhance operational efficiency, manage costs effectively, and capitalise on higher gold revenue during the quarter.

In the period, the all-in sustaining cost (AISC) declined 8.2% to US$1 296 per ounce from US$1 412 per ounce in the comparable period due to the lower production costs incurred at Bilboes and the non-recurrence of advisory costs for the Bilboes acquisition in 2023.

An electricity saving of US$51 per ounce for the quarter from the solar plant is included in AISC.

Due to the reclassification of some ongoing capital expenditure items on projects as “sustaining” investment rather than “expansion” investment, AISC is predicted to be higher for the entire year 2023 than in prior years, albeit lower than quarterly.

The improved financial performance indicates Caledonia’s ability to navigate challenges and capitalise on opportunities in the mining sector, ultimately leading to a more favourable financial outcome compared to the previous year.

Revenue for the gold miner went up 30.89% to US$38.52 million from US$29.43 million in the same period last year.

The accelerated devaluation of the Zimbabwe currency during the first quarter of 2024 resulted in a foreign exchange loss of US$4.1 million for the gold miner. Foreign exchange fluctuations can impact a company’s financial performance, and in this case, the exchange loss highlights the challenges posed by currency volatility on Caledonia’s financial results.

Caledonia.JPG

Analysts say it is essential for companies operating in regions with volatile currencies to manage their foreign exchange exposure effectively to mitigate potential losses and maintain financial stability.

In terms of operations, gold output rose 8.27% to 17,476 ounces in Q1 2024 from 16,141 ounces in Q1 2023.

“The first quarter of 2024 got off to a strong start with an increase in production and profit, supported by a favourable gold price. This has continued through April and into May.

“We were highly encouraged by the results from the underground exploration programme which has yielded excellent results indicating that the Blanket, Eroica and AR South ore bodies have better than expected grades and widths at depth. The results of this drilling programme are being incorporated into a new technical report summary for Blanket Mine which we will announce shortly; it will show a meaningful increase in the life of the mine at Blanket.

“Work to refresh the existing study for the large-scale sulphide project at Bilboes is well-advanced. Management is considering various options for developing Bilboes, with a view to optimising capital allocation and maximising the uplift in value for Caledonia shareholders. I look forward to updating investors with these results in the next few weeks. Thereafter, the work on the selected development route will be upgraded to a feasibility study. This activity will take place in parallel with a process to secure debt finance for the project,” Caledonia chief executive officer Mark Learmonth said in a trading update.

Blanket maintains its production projection of 74,000 to 78,000 ounces of gold for the year ending December 31, 2024.

Our thoughts

Encouraging results from exploration programs and the expectation of an increase in the life of mine at Blanket Mine suggest potential growth opportunities. The ongoing work on the large-scale sulphide project at Bilboes indicates a strategic focus on maximising shareholder value and optimising capital allocation.

By ETimes

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