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Caledonia’s production, net cash and gross profit decline in last quarter

 By Business Reporter

HARARE (Mining Index) – CALEDONIA Mining Corporation’s gold production, net cash and gross profit was down in the last quarter of 2018 relative to same period in 2017.

Commenting on the results for the third quarter of 2018, Chief Executive Officer Steve Curtis said gold production was 2.9 per cent below compared to the same quarter ended September 30, 2017 owing to lower grade.

“Production of 13,978 ounces was 3 per cent down on the third quarter of 2017 (the “comparable quarter”) and marginally below our expectations.”

“Grade for the Quarter remained below expectations at 3.12g/t as we continued to experience some mining dilution due to the introduction of long-hole stopping in the narrower reef width areas due to safety considerations.

Caledonia is expanding the Central Shaft, which is expected to result in increased production, reduced operating costs and increased flexibility to undertake further exploration and development, thereby safeguarding and enhancing Blanket’s long-term future.

“Corrective measures have been taken to improve the accuracy of drilling which are expected to result in improved mined grades in the remainder of the last quarter of 2018 and thereafter.”

In the third quarter, Caledonia revised downwards its 2018 full year production from the initial range pegged between 55,000 to 59,000 ounces down to 54,000 to 56,000 ounces.

Net cash and cash equivalents were lower due to the continued high level of capital expenditure, resulting in the company posting a net cash of$5.9 million at the end of the quarter.

Caledonia’s on-mine costs increased due to higher equipment maintenance costs and increases in the cost of certain consumables.

“Net cash from operating activities remained robust at $6.8 million although this was lower than the comparable quarter which was an unusually strong quarter,” said Curtis.

Curtis said working capital returned towards normal levels during the quarter after some significant adverse movements in the previous quarter.

“The net cash balance of $5.9 million at the end of the Quarter is a modest improvement on the preceding quarter and the ability of our business to generate cash remains robust,” said.

He added that post-tax operating cash flows in the quarter after working capital movements of $6.8 million, were sufficient to support both capital investment during the quarter of $5.2 million and the quarterly dividend payment to Caledonia’s shareholders.

Adjusted earnings per share for the Quarter of 33.1 cents were 17 per cent lower than the comparable quarter, due to a slightly weaker realised gold price and increased production costs.

Gross profit in the third quarter was also lower than the comparable quarter due to lower revenues and increased production costs.

Net profit attributable to shareholders was lower in the quarter than the comparable quarter due to the lower gross profit, the effect of which was reduced by increased ECI and reduced administrative expenses.

Caledonia announced that gold production for the nine months to September 30, 2018 was 39,558 ounces, 0.4 per cent down on the corresponding period of 2017.

However, production was 24.4 per cent higher for the nine months to September 30, 2018 compared to the same period of 2017 due to the increased export credit incentive and a higher average realised gold price for the nine months.

Despite low depleted production, low net cash and gross profit, Curtis said Caledonia improved from the second quarter of 2018 saying, “The third quarter of 2018 (the “Quarter”) was an improvement on the second quarter of the year: we addressed some of the operating challenges which the business experienced in previous quarters; cost control remained good; and Caledonia stabilized its cash position and working capital movements.”

“We remain confident that the underlying geological model for Blanket and the grade of the resource remains sound. I am pleased that the mine was to some extent able to compensate for lower grades through increased plant throughput, an effort that has contributed substantially to the Quarter’s performance. Tonnes milled during the Quarter were significantly higher at 151,000 tonnes, 14 per cent higher than the second quarter of 2018 and 11 per cent higher than the comparable quarter,” he said. ENDS//

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