Caledonia Mining has reported comprehensive 2016 earnings of US$11.1m against US$5.6m for 2015. When adjusted to reflect underlying performance, EPS was US21.4c against US8.8c a year earlier, an increase of 143%.
The company has a 49% interest in the 100-year-old Blanket gold mine, in Zimbabwe, although, through the structure of its indigenisation arrangement, it participates currently in the mine’s cash flow at the much higher level of 77%.
Net profit attributable to Caledonia’s shareholders increased substantially from US$4.8m to US$8.5m in 2016 and from US$1.9m to US$3.3m in Q4 16 (year-on-year). EBITDA for the year was US$19.7m, a 122% improvement on 2015.
Net profit benefitted from an export incentive from the Zimbabwe government of 2.5% of the value of gold sales (US$1.1m) and through the sale of treasury bills issued by the government of Zimbabwe in 2015 (US$3.2m). There was also a one-off reduction in the royalty rate of incremental gold sales above the 2015 figure.
The improvement in underlying profitability came on the back of an increase in revenue, owing mainly to a significant increase in gold production, and despite a small increase in total costs.
Revenue from gold sales increased by 27% as a result of a 18% increase in gold production and an 8% increase in the gold price received. Gold production for the year rose to 50.4koz as the initial benefits of the expansion programme led to an increase in ore production from below the 750m level. In addition, the commissioning of a new ball mill increased the processing capacity of the plant. The average ore grade treated was also up marginally on 2015.
Production costs increased by 7% to US$32.1m after the cost of consumables rose by 13%. However, because of the increased gold production, unit costs recorded significant reductions. On-mine costs fell by 9% to US$636/oz and AISC fell 12% to US$912/oz. AISC declined by 12% to US$912/oz.
The Blanket operations generated cash of US$23.1m and after spending a total of US$19.9m on expansion projects and sustaining capital, the company increased its cash position at the end of the year to US$14.3m (2015:US$10.9m). This figure includes the drawdown of US$3m from a Zimbabwean bank debt facility after converting a US$5m overdraft facility into a two-year term loan.
In July 2016, the board of Caledonia increased the quarterly dividend by 22%, to US1.375c per share, and the company has maintained this level for annual aggregate dividends of US5.5c per share. Dividends paid in 2016 totalled US5.0c/share. In January 2017, the company declared a quarterly dividend of US1.375c/share.
The company completed significant elements of its expansion programme in 2016, with the key element, a new vertical shaft, on schedule for mid-2018 completion. The mine is targeting a further increase in production to approximately 60koz in 2017, at an AISC of US$810-850/oz, and 80koz by 2021
Caledonia’s adjusted EPS rises 143% to US$21.4c per share: CMCL