CALEDONIA Mining Corporation (Caledonia) gold production was down three percent to 54,511 ounces during the full year ended December 31, 2018 compared to 56 133 ounces recorded in prior year due to lower grade.
Steve Curtis, Caledonia chief executive officer said the firm — which owns 49 percent of Zimbabwean gold mining unit, Blanket Mine — delivered a robust performance, despite the well-known challenges of operating in Zimbabwe.
“Production for the year was lower than in 2017 primarily due to an unplanned lower recovered grade as a result of added dilution due to the adoption of long-hole stoping in certain areas for safety reasons,” he said in a production update.
“Provided the drilling is accurate and the shape of the reef does not vary too much, long-hole stoping is an efficient mining method; however, drilling accuracy and choice of the most suitable areas to use this methodology is essential to reduce the dilution,” Curtis said.
He added that management is addressing this by conducting extensive re-training of drillers, and the situation appears to be improving.
The Toronto Stock Exchange-listed mining house recorded a $21,587 million gross profit for the year ended December 31, 2018, which was lower due to lower production and higher production cost.
During the three months ended December 31, 2018, gross profit was $5,374 million compared to $8,411 million recorded in prior comparable period, affected by lower realised price of gold.
Curtis said production is now expected to be approximately 75,000 ounces in 2021 increasing to approximately 80,000 ounces in 2022.
“During the year we continued to implement the investment plan at Blanket Mine with the objective of increasing production to 80,000 ounces per annum.
“Certain operational and economic factors have resulted in less development being achieved than planned, which will result in a slower production ramp-up than originally expected,” Curtis said.
He said the Central Shaft has reached a depth of 1,150 metres — only 54 metres from the planned shaft bottom.
He said the firm expects the shaft sinking to be completed by the end of June 2019, after which the shaft will be equipped prior to commissioning which is scheduled for mid-2020.
Curtis said exploration continues at Blanket with encouraging results.
“The monetary environment in Zimbabwe became more challenging following changes in policy although the general direction of policy development appears to be positive. Policy changes disrupted the commercial banking system in October 2018 and February 2019 which adversely affected procurement,” he said.
Delays in procuring critical items meant that capital equipment suffered from a lack of maintenance which increased the frequency of breakdowns, Curtis said.
“We are optimistic that the introduction of a market exchange rate in February 2019 will, in time, allow a return to normal operating conditions,” he said.
He said costs during the year were higher than expected due to a combination of increased prices for cyanide and steel, the increased cost of a larger fleet of trackless equipment which operates in the declines and the adverse effect of lower than expected grades.
Net profit attributable to shareholders for the year increased from $9,4 million to $10,8 million.
Cash generated by operations before working capital was $25,8 million for the year, compared to $26,8 million in previous comparable period.
Curtis said working capital increased by $4,7 million in the year compared to a reduction of $2,1 million in 2017 due to an increase in amounts due in respect of gold sales and VAT refunds from the government of Zimbabwe a reduction in trade and other payables.