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Enacy Mapakame
Analysts have projected improved 2024 performance for the Victoria Falls Stock Exchange (VFEX) listed firm — Caledonia Mining Plc, as the resources group addresses some of the setbacks experienced during the prior year.
The group, earlier in March, issued a profit warning, as it projected depressed full-year profitability weighed by increased operating costs at its Gwanda-based Blanket Mine, consisting of higher-than-expected overtime payments and electricity costs.
Caledonia incurred several significant one-offs, non-operating costs during the fourth quarter (Q4) period, which were expected to have a knock-on effect on profitability for the full year to December 31, 2023.
Its fourth quarter saw the commencement of work at its second asset, Bilboes, with operations centred on mining and processing oxides. The oxides project yielded 3 050 ounces of gold at an average grade of 1,13 grade per tonne in the period under review.
Operations were, however, hindered by an unforeseen need for extensive waste, stripping in the relevant areas and inaccurate mineralisation maps, resulting in the project not meeting its expected output of between 12,500 ounces and 17,000 ounces.
As a result, the group’s aggregate gold production for FY23 registered at 78,466 ounces, a 3 percent decline from the 80,775 ounces in the prior comparable year.
While the group experienced these challenges, research firm IH Securities sees better prospects for the resources group.
“Whilst Caledonia experienced significant setbacks in FY23, we foresee alleviation of some key issues in the current year,” said IH Securities.
As per management reports, running costs at Bilboes after it was placed under care and maintenance, have fallen from US$1 million per month to US$0,2 million.
“However, work on the much larger scale Bilboes sulphides project is still ongoing in the background with the existing feasibility study now at an advanced stage,” said the research firm.
Indicative gold production at Blanket Mine for the year has been set at between 74,000 and 78,000 ounces at an on-mine cost and AISC foreseen at an upper range of US$970 and US$1,470 per ounce, respectively.
Electricity costs are notably expected to remain high in the short term and then decrease as older, less efficient infrastructure, gets decommissioned.
Management has also shown optimism that the cost increases experienced in the prior year will not extend into 2024, while year-to-date production and costs at Blanket Mine is within expectations of full-year guidance so far.
Additionally, the resources group is also introducing measures aimed at reducing electricity costs over the medium term.
“A number of the other cost items are not anticipated to be recurring, whereas others have arisen from our decisions to invest in the business, most notably around personnel and advancing the Bilboes sulphide project.
“I am confident that many of these will not recur in 2024, which has started positively and I look forward to the future with optimism, as we pursue our goal of becoming a multi-asset production company,” said group chief executive Mr Mark Learmonth in an earlier communication.
As a result, the group is expected to see an improvement in margins.
“At an average gold price of US$2,226 per ounce, we anticipate that Caledonia will register revenue of US$171 million in FY24.
“Margins are expected to improve in the year, with an EBITDA margin foreseen to firm up to 43,3 percent.
“Negotiations for the sale of the solar plant are at an advanced stage, which will free up cash flows for core business lines,” expressed IH Securities.
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