Caledonia Stays on Track for Growth, Despite Rising Costs and Currency Pressures

Mark Learmonth caledonia

Caledonia Mining has reported solid results for the third quarter of 2024, with revenues reaching $46.9 million for the quarter and a total of $135.5 million for the first nine months of the year. The company’s gross profit of $19.3 million is a healthy increase from $14.1 million in the same period last year, largely driven by a rise in gold prices and a stronger performance from the Bilboes oxide mine. However, rising costs at the flagship Blanket Mine and challenges stemming from the devaluation of the Zimbabwean currency have put pressure on the company’s overall costs.

By Ryan Chigoche

For the quarter, the cost to produce an ounce of gold at Blanket increased to $1,056, up from $928 in Q3 2023. This rise was largely due to lower ounces sold and increased production costs.

The company’s all-in sustaining cost (AISC) also climbed to $1,501 per ounce, compared to $1,268 last year. These higher costs were driven by a combination of factors, including rising labor and electricity costs, as well as an increase in share-based payment expenses due to the higher company share price.

Despite these cost challenges, Caledonia Mining is still on track to meet its full-year production target of between 74,000 and 78,000 ounces for 2024, and it’s confident in hitting a similar target for 2025. “We’re pleased with how the business is performing overall,” said Mark Learmonth, CEO of Caledonia Mining. “Higher gold prices and the solid contribution from Bilboes have helped offset some of the pressures we’re seeing on the cost side, particularly with electricity and labor. We’re working hard to keep costs under control, and we’re focused on long-term growth.”

The company also declared a dividend of 14 cents per share, which will be paid to shareholders on December 6, 2024, underscoring its commitment to delivering value. Learmonth added, “We remain focused on maintaining a solid production profile and creating sustainable value for our investors.”

Caledonia’s net cash from operating activities for the quarter was $4.6 million, down from $14.5 million in the same period last year. This decrease reflects lower operating profits, the impact of the Zimbabwean currency devaluation, and higher tax payments due to the timing of payments.

Additionally, the company has been accelerating its investment in inventory to support preventative maintenance at Blanket, which has led to increased working capital needs. However, operating cash flow before changes in working capital remained steady at $16.2 million, in line with last year’s $16.3 million.

Looking ahead, Caledonia Mining remains focused on its growth strategy, with exploration continuing at both Blanket and Motapa. The company is making progress on the Bilboes sulphide project, with a feasibility study due to be completed by the first quarter of 2025.

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The company is also working on securing a funding structure for Bilboes that will minimize equity dilution and optimize shareholder value.

One of the company’s more strategic moves in the quarter was the conditional sale of its 12.2 MWac solar plant for $22.35 million. The solar plant, which provides renewable energy to Blanket Mine, will continue to supply about 20% of the mine’s daily electricity needs after the sale is completed. “Selling the solar plant is an important step for us,” explained Learmonth. “It gives us capital to reinvest in the business while ensuring Blanket continues to benefit from renewable energy.”

Despite some challenges in the quarter, Caledonia Mining remains optimistic about its future. “We’re confident in our long-term strategy,” said Learmonth. “We’re making smart investments now that will pay off as we continue to grow the business. Blanket remains a strong foundation for us, and we’re excited about the future opportunities at Motapa and Bilboes. We’re focused on ensuring that we create lasting value for our shareholders in the years ahead.”

 

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