‘Blanket Mine still profitable despite weak gold price’

TORONTO Stock Exchange-listed Caledonia Mining Corporation says its 49 percent owned unit, Blanket Mine, remains profitable despite weak gold prices.

In a statement accompanying the gold producer’s results for both the second quarter and first half of this year, Caledonia chief executive Steve Curtis, however, cautioned investors to revise their expectations if the prevailing gold price trend continues, as it could reduce Blanket’s cash generation.

“Subsequent to the end of the second quarter of 2015, the price of gold fell significantly. Blanket continues to operate profitably at the lower gold price and production and costs remain as planned.

“If the current gold price is sustained, however, investors should revise their expectations for Caledonia’s future financial performance to reflect the prevailing environment.

“As production begins to increase from the first quarter of 2016, I expect that average costs per ounce will start to fall. I look forward to updating the market of our progress in due course,” he said.

The price of gold has in recent months fallen from over $1,200 per ounce to below $1,100 per ounce.

In terms of production, Blanket Mine’s gold output in both the second quarter and half-year was “slightly ahead of target,” reported the company.

In the second quarter the mine produced 10,401 ounces, which was, however, lower than the 11,223 ounces produced in the prior comparable period.

Blanket Mine produced 20,361 ounces of gold in the first half of this year, again lower than the 21,464 ounces produced during the comparable period in 2014.

Gross profit for the second quarter amounted to $5,6 million, while gross profit for the first half was $8,6 million.

“Lower gross profit was due to fewer ounces sold, lower gold price and higher on-mine costs,” said Caledonia.

Curtis said the implementation of the mine’s expansion programme should boost its operations going forward.

“We’re currently sinking, deepening or equipping four shafts at Blanket Mine in Zimbabwe and I expect this activity will translate into increased production from the first quarter of 2016,” he said.

“Caledonia’s board and management believe that the implementation of the revised investment plan remains in the best interests of shareholders. The successful implementation of the plan will result in a significant increase in Blanket’s production and operating efficiency; the lower gold price increases the importance of delivering the revised investment plan as scheduled.

“I’m pleased to report that we’ve met all of our key milestones and we remain on target for achieving all of the future milestones.”

Caledonia also said it will continue with its quarterly dividend policy of 1,5 Canadian cents per share, which amounts to a total dividend of six Canadian cents per annum. — BH24.