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Caledonia Mining records US$37m revenue in Q2

Caledonia said some of the challenges encountered in the first quarter had been addressed and production improved substantially in the second half of June and in July.

GROSS revenues at the Victoria Falls Stock Exchange-listed resources giant Caledonia Mining Corporation marginally dropped by 0,2% to US$37 million in the second quarter of this year due to the costs of waste-stripping at the Bilboes oxide operation.

Last year in the same period, revenues stood at US$37,09 million.

Bilboes, which is one of Caledonia’s operations, will be returned to care and maintenance with effect from October 1, 2023 due to lack of confidence that the mine can operate profitably.

Pending the completion of the feasibility study for the sulphide project, the remaining oxides will be mined as part of the larger project.

According to the group’s operating and financial results for the quarter and the six months ended June 30, 2023, gross profit stood at US$10,9 million in the second quarter, a 39,1% drop on the prior period.

“While Blanket Mine contributed US$13,1 million, the group’s gross profit was affected by the costs of waste-stripping at the Bilboes oxide operation, notwithstanding a small revenue contribution of US$2,2 million in the quarter,” it said.

Earnings before interests, taxes, depreciation and amortisation (EBITDA), excluding asset impairments, depreciation and net foreign exchange gains and losses, stood at US$10,5 million.

Blanket Mine achieved gold production of 17 436 ounces in the quarter under review, down from 20 091 ounces produced last year in the same quarter.

Bilboes oxide operation produced 1 076 ounces of gold.

In the first half, Caledonia produced 34 653 ounces of gold, a drop of 10,2% compared to the prior half.

“Mining is never without its difficulties, and the first half of this year has certainly not been without its challenges,” Caledonia chief executive officer, Mark Learmonth said in a commentary.

“However, Blanket is now running better than expected and I look forward to achieving production guidance of between 75 000 and 80 000 ounces of gold for 2023. Due to lack of confidence that the Bilboes oxide mine can operate profitably, it will return to care and maintenance with effect from October 1, 2023.”

He added: “In due course, the remaining oxide material will be mined and processed alongside the sulphide ore.

“This outcome has no bearing on the viability of the much larger sulphide project which was the reason for acquiring Bilboes.

“The results of the feasibility study on the project will be published before year end after which we will be able to establish the best development approach.”

On-mine cost per ounce for the quarter of US$1 084 included the costs of the Bilboes oxide operation.

At Blanket, the on-mine cost per ounce was US$915 from US$692 recorded in the same period last year.

“This increase was in large part due to the disappointing production performance in the quarter; the production challenges now appear to have been addressed and July 2023 showed a material improvement in production and costs,” the firm said.

Group net cash outflows from operating activities of US$2,2 million in the quarter included waste-stripping activities at Bilboes and the payment of legacy creditors at the same mine.

The waste-stripping activities will facilitate access to the sulphide mineralisation when the sulphide project is in operation.

Net cash and cash equivalents were negative at US$2,9 million.

However, the improved operating performance after the end of the quarter led to cash inflow from operations before a working capital change of US$7,7 million in July.

The company suffered a foreign exchange loss in the quarter of US$3,6 million due to the significant devaluation of the Zimbabwe dollar against the US dollar in June 2023.

This affected operating profit.

The mining firm, however, said some of the challenges encountered in the first quarter had been addressed and production improved substantially in the second half of June and in July.

As a result, the company produced 7 829 ounces of gold at Blanket in July at an on-mine cost of US$715 per ounce.

During the second quarter, the company commenced the direct sale of gold to an end refiner outside Zimbabwe.

This arrangement is a big milestone for Caledonia and further demonstrates the pragmatic approach of the Zimbabwean authorities to resolve commercial issues facing gold producers, the company said. – (Newsday)

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