London Stock Exchange-listed Caledonia Mining Corporation reported a 265% after tax growth to US$50.4m in the year to December 2019 on account of a weakening Zimbabwe dollar which effectively saw operating and utility costs sliding, CEO Steve Curtis has said.
Caledonia, which operates Blanket Mine in Zimbabwe in which it has a 64% stake, said profit in the year, was further enhanced by a net foreign exchange gain of approximately US$30m.
Power costs are lower after Blanket Mine and other gold producers entered into an agreement in which they import electricity directly into Zimbabwe from neighbouring countries.
“This gain, which is largely unrealised, was due to the sharp devaluation of the Zimbabwe currency from February 2019 onwards, which reduced the US Dollar values of bank loans and the deferred tax liability,” Curtis said in a statement of the annual results for 2019.
Revenues closed the year at US$75.8m, up from US$68.4m in 2018 while production costs slid by close to US$43m to US$36.4m.
Administration expenses closed 2019 at US$5.6m, down from US$6.5m.
Curtis said on-mine costs per ounce for the year under review were US$651 per ounce compared to US$$690 per ounce in 2018 due to lower electricity costs in the first part of the year and lower on-mine administration costs due to the devaluation of the Zimbabwe currency.
The company said if exchange rates remain unchanged, these unrealised losses will be realised from 2021 onwards as the deferred tax liability begins to unwind and the term loans begin to fall due for payment.
Basic earnings per share for the year on an IFRS basis were 382 cents per share compared to 99 cents per share in 2018, after adjusting for the net foreign exchange gain were 152 cents per share compared to 97 cents in 2018.
Curtis said Blanket Mine’s strong performance resulted in a record level of production in the quarter.
Increased production, combined with lower on-mine costs per ounce and an improved gold price, resulted in a substantial increase in profit.
“The excellent financial and operating performance is particularly pleasing given the difficult start to the Year and is testament to the resilience and tenacity of the management and workforce at Blanket and at Caledonia,” Curtis said, adding cash flows remain strong, despite continued substantial investment in the central shaft.
Cash flows from operating activities were US$23.9m for the year compared to US$21.1m for 2018.
In an update of operations, Caledonia said gold production stood at 55,182 ounces of gold compared to 54,511 ounces in 2018.
Of the total production, 16,876 ounces was produced in the fourth quarter alone compared to 14,952 ounces in the fourth quarter of 2018.
Shaft sinking at Central shaft was completed in July 2019 to the target depth of 1,204 metres.
Work has commenced on equipping the shaft with commissioning expected before the end of 2020.
In 2020, Caledonia forecasts gold production of between 53,000 and 56,000 ounces which is similar to 2019 pending the completion of the Central Shaft.