- August 14, 2019
- Posted in LOCAL
CALEDONIA Mining continues to make money whilst placing the bravest of faces on operations in Zimbabwe where it operates its Blanket gold mine. It is helped by the devaluation in the southern African country’s currency, but the firm scores highly for grit in any case.
Earlier this week, it reported lower adjusted interim earnings year-on-year, but an improved cash position of $8m. This augurs well for the continuance of dividend payouts which is not common for a Zimbabwean gold producer.
Its June quarter and interim results published earlier this week give some insight into the difficulties faced by mining firms in Zimbabwe.
Briefly lit by hope following the toppling of dictator Robert Mugabe in November 2017, Zimbabwe has under President Emmerson Mnangagwa, slipped backwards with inflation back on the agenda amid a currency crisis and near round-the-clock blackouts.
Caledonia cut production guidance for the year to a maximum of 53,000 ounces compared to a previous 56,000 oz at the high end of its guided range owing to low grade at its Blanket mine, which it is expanding for $45m, but also owing to electricity shortages in July and early August.
Luckily, an improvement in the dollar gold price and lower than expected costs are expected to result in no surprise changes to share earnings guidance forecast to come in at 86 to 117 cents for the year. But the problems of operating in Zimbabwe are significant.
The flip side of the 10-fold devaluation in the Zimbabwean dollar since February – which with rand and sterling weakness reduces the dollar value of expenses incurred in them – is the impact of inflation.
Steve Curtis, CEO of Caledonia, said inflation had “made life difficult” for the firm’s staff, but he was convinced it was the function of fiscal ill-discipline of the previous regime, not the Mnangagwa administration where recent tax incentives, such as the deductibility of royalty payments, was welcomed by the company.
In order to combat the likelihood of continued disturbed electricity supply, however, Caledonia is considering building solar power. “Although the electricity situation has improved in recent days, we feel it prudent to continue to implement plans to protect Blanket from any recurrence of this problem,” said Curtis.
In the meantime, it had bought diesel generators as a back-up and recently signed a new electricity agreement in terms of which it will receive uninterrupted power at a lower cost than it previously paid.
Source: Mining MX