Caledonia Mining Corporation PLC Results for the quarter ended 31 March 2019 (8886Y)

TIDMCMCL

RNS Number : 8886Y

Caledonia Mining Corporation PLC

14 May 2019

Caledonia Mining Corporation Plc

Results for the quarter ended 31 March 2019

St Helier, 14 May 2019 - Caledonia Mining Corporation Plc ("Caledonia" or the "Company") announces its operating and financial results for the first quarter of 2019 ("Q1" or the "Quarter").

Gold production in the Quarter was 11,948 ounces, approximately 8 per cent below the first quarter of 2018 (the "comparable quarter" or "Q1 2018"). Production was adversely affected by lower grade, although this was anticipated as part of the mine plan.

Consolidated operating profit before tax of $12.3m for the Quarter was 105 per cent higher than Q1 2018 although this increase was entirely due to exceptional gains of $3.3 million on foreign exchange following the devaluation of the domestic Zimbabwean currency and a profit on the sale of a subsidiary of $5.4m.

Attributable profit after tax was also substantially higher than the comparable quarter in 2018 at $9.3m again due to exceptional items which outweighed lower gross profit. Foreign exchange gains and profits arising on disposal are excluded from Caledonia's adjusted earnings per share of 23 cents which were 44 per cent lower than the comparable quarter, largely due to reduced production and higher on-mine costs.

Operating cash flows for the Quarter were $6.3 million (Q1 2018; $7.0 million) and the Company's balance sheet remains strong with net cash of $9.7 million as at 31 March 2019. Amounts stated below are expressed in thousands of US Dollars, unless otherwise stated or the context requires otherwise.

 
                         Q1 2018   Q1 2019   % Change   Comment 
 Gold produced           12,924    11,948     -7.6%     Lower gold production was mainly due 
  (oz)                                                   to lower grade, which was in-line with 
                                                         the mine plan. The grade dilution which 
                                                         was experienced in previous quarters 
                                                         has largely been addressed. Production 
                                                         was less than planned due mainly to 
                                                         lower than planned tonnage 
                        --------  --------  ---------  ---------------------------------------------- 
 On-mine cost              687       794      15.6%     On-mine costs increased due to Blanket's 
  per ounce ($/oz)[1]                                    high fixed costs, which has an adverse 
                                                         effect at low production levels. Labour 
                                                         rates and the costs and consumption 
                                                         rates for certain consumables were also 
                                                         higher, but were as expected 
                        --------  --------  ---------  ---------------------------------------------- 
 All-in sustaining         832       943      13.3%     AISC increased due to the higher on-mine 
  cost ($/oz)                                            cost per ounce the effect of which was 
  ("AISC")(1)                                            partially offset by lower sustaining 
                                                         capital investment and lower administrative 
                                                         expenses 
                        --------  --------  ---------  ---------------------------------------------- 
 Average realised         1,312     1,284     -2.1%     The average realised price of gold reflects 
  gold price                                             the prevailing gold price received: 
  ($/oz)(1)                                              revenues from the export credit incentive 
                                                         ("ECI") and gold support price are accounted 
                                                         for as "other income" 
                        --------  --------  ---------  ---------------------------------------------- 
 Gross profit             6,223     4,284     -31.2%    Gross profit was lower due to a reduction 
  ([2])                                                  in the number of ounces sold and increased 
                                                         on-mine cost per ounce 
                        --------  --------  ---------  ---------------------------------------------- 
 Net profit               3,154     9,318     195.4%    Net profit attributable to shareholders 
  attributable                                           increased due to foreign exchange gains 
  to shareholders                                        and the profit on disposal of a subsidiary, 
                                                         the combined effect of which outweighed 
                                                         lower gross profit 
                        --------  --------  ---------  ---------------------------------------------- 
 Adjusted basic           40.8      23.0      -43.6%    Adjusted basic earnings per share excludes 
  earnings per                                           deferred tax, foreign exchange gains 
  share ("EPS")[3]                                       and the profit on disposal of a subsidiary 
  (cents) 
                        --------  --------  ---------  ---------------------------------------------- 
 Net cash and 
  cash equivalents       13,380     9,742     -27.2%    Net cash remains strong 
                        --------  --------  ---------  ---------------------------------------------- 
                                                        Cash from operating activities remains 
 Cash from operating                                     robust and exceeded capital investment 
  activities              7,045     6,275     -10.9%     in the Quarter 
                        --------  --------  ---------  ---------------------------------------------- 
 

Commenting on the results, Steve Curtis, Caledonia's Chief Executive Officer said:

"Notwithstanding the production difficulties experienced as a result of lower than expected production tonnage, unreliable electricity supply and lower mine grade, cash generation for the quarter was solid at $6.3 million - sufficient to support both capital investment in the Central Shaft project of $5.1 million and Caledonia's regular quarterly dividend as well as maintain a healthy balance sheet with net cash of $9.7m at the end of March.

"Work on sinking the Central Shaft remains on track. I expect shaft sinking to be completed in the middle of this year after which a further 12 months will be needed to equip the shaft before it is commissioned in mid-2020 and we can begin to increase production to our target of 80,000 ounces per annum by 2022. This production increase will contribute significantly to reducing operating costs through economies of scale and we look forward to further increasing cash flows and earnings as the shaft is commissioned.

"We maintain our full year production guidance of 53,000 - 56,000 ounces for 2019. I look forward to an improved cost performance in the remaining quarters of the year as we anticipate that the beneficial effects of improved production will be felt in the subsequent quarters of 2019.

"The early part of the Quarter was made more challenging by some significant macroeconomic disruptions. In particular, the continuation of the currency peg between domestic currency and the US dollar caused severe hardship to our employees in Zimbabwe due to their reduced purchasing power which had repercussions for employee morale. The removal of the currency peg in late February resulted in a devaluation of the local currency and allowed management to take steps to remediate the situation of our employees. This, in conjunction with other measures to address operational issues, has resulted in improved performance: I am pleased to report that production in April was almost exactly as planned and we are confident that production will improve in the remainder of 2019.

"The devaluation did however have a one-off positive financial impact on our results with a foreign exchange gain of $3.3 million arising on the revaluation of assets and liabilities that are denominated in local currency. Looking forward, provided the exchange rate which is used to calculate Blanket's local currency denominated gold receipts recognises economic fundamentals, management is optimistic that current monetary policy may create a more stable economic environment.

"Unit costs in the Quarter, although higher than the comparable quarter of 2018, were largely as expected. Blanket's relatively high fixed costs component makes our business particularly sensitive to production volumes. On-mine cash costs per ounce of $794 and AISC of $943 were 15.6 per cent and 13.3 per cent higher respectively than the comparable quarter in 2018 although in line with budget.

"Operating profit was boosted by exceptional one-off gains on the sale of Eersteling (a South African gold mine which has been held on care and maintenance for many years) and the foreign exchange gain arising on the devaluation of the domestic currency.

"I am particularly pleased that we have maintained a safe working environment during what was clearly a difficult time for all our Zimbabwe based employees. I join with my fellow directors in expressing our sincere gratitude to all our management and staff for their contribution to this achievement.

"Notwithstanding the challenges experienced in the Quarter, we remain encouraged by the overall direction of policy development which we believe will result in improved operating conditions and a better investment climate in Zimbabwe. The most recent positive development in this regard is the introduction of a gold support price of $1,368 per ounce, a premium above the prevailing spot price in order to incentivize domestic gold production. On the exploration front, we are also particularly encouraged by Zimbabwe's geological prospectivity and we continue to evaluate potential investment opportunities."

For further information please contact:

 
 Caledonia Mining Corporation Plc 
  Mark Learmonth                        Tel: [phone] 
  Maurice Mason                         Tel: [phone] 
 WH Ireland                           Tel: [phone] 
  Adrian Hadden/Jessica Cave/James 
  Sinclair-Ford 
 Blytheweigh                          Tel: [phone] 
  Tim Blythe/Camilla Horsfall/Megan 
  Ray 
 
 
 Condensed Unaudited Consolidated Statement of Profit or Loss and Other 
  Comprehensive Income 
  ($'000's) 
                                                                       3 months ended March 
                                                                                31 
                                                                        2019            2018 
 
 
                                                                           $               $ 
 
 Revenue                                                              15,920          18,059 
 Royalty                                                               (819)           (904) 
 Production costs                                                    (9,769)        (10,010) 
 Depreciation                                                        (1,048)           (922) 
                                                               -------------  -------------- 
 Gross profit                                                          4,284           6,223 
 Net other income                                                      1,200           1,381 
 Administrative expenses                                             (1,396)         (1,542) 
 Profit on sale of subsidiary                                          5,409               - 
 Foreign exchange gain                                                 3,280              71 
 Equity-settled share-based expense                                        -            (14) 
 Cash-settled share-based expense                                      (361)           (114) 
 Cost of gold hedge                                                    (130)               - 
 Operating profit                                                     12,286           6,005 
 Net finance cost                                                       (48)            (16) 
                                                               -------------  -------------- 
 Profit before tax                                                    12,238           5,989 
 Tax expense                                                         (1,519)         (2,110) 
                                                               -------------  -------------- 
 Profit for the period                                                10,719           3,879 
                                                               -------------  -------------- 
 
 Other comprehensive income 
 Items that are or may be reclassified to profit 
  or loss 
 Foreign currency translation differences for 
  foreign operations                                                   (144)             208 
 Reclassification of accumulated exchange differences                (2,109)               - 
  on the sale of subsidiary 
 Total comprehensive income for the period                             8,466           4,087 
                                                               ------------- 
 
 Profit attributable to: 
 Shareholders of the Company                                           9,318           3,154 
 Non-controlling interests                                             1,401             725 
                                                               -------------  -------------- 
 Profit for the period                                                10,719           3,879 
                                                               -------------  -------------- 
 
 Total comprehensive income attributable to: 
 Shareholders of the Company                                           7,065           3,362 
 Non-controlling interests                                             1,401             725 
                                                               -------------  -------------- 
 Total comprehensive income for the period                             8,466           4,087 
                                                               -------------  -------------- 
 
 Earnings per share (cents) 
 Basic                                                                  88.6            29.3 
 Diluted                                                                88.5            29.2 
 Adjusted earnings per share (cents) (i) 
 Basic                                                                  23.0            40.8 
---------------------------------------------------------      -------------  -------------- 
 
 
 
 Consolidated Statements of Financial Position (unaudited) 
 ($'000's)                                          As at   March 31        Dec 31 
                                                                2019               2018 
 Total non-current assets                                    102,625             97,525 
  Inventories                                                  9,068              9,427 
  Prepayments                                                  1,077                866 
  Trade and other receivables                                  5,456              6,392 
  Gold hedge receivable                                          194                  - 
  Cash and cash equivalents                                    9,742             11,187 
  Assets held for sale                                             -                296 
                                                           ---------  ----------------- 
 Total assets                                                128,162            125,693 
                                                           ---------  ----------------- 
 Total non-current liabilities                                29,694             34,687 
  Trade and other payables                                     9,700             10,051 
  Income tax payable                                           1,205              1,538 
  Cash-settled share-based payments                              134                  - 
   - short term portion 
  Liabilities associated with assets 
   held for sale                                                   -                609 
                                                           ---------  ----------------- 
 Total liabilities                                            40,733             46,885 
                                                           ---------  ----------------- 
 Total equity                                                 87,429             78,808 
                                                           ---------  ----------------- 
 Total equity and liabilities                                128,162            125,693 
----------------------------------------  -------  ------  ---------  ----------------- 
 
 
 
 Condensed Consolidated Statement of Cash Flows (unaudited) 
  ($'000's) 
                                                      3 months ended March 31 
                                                           2019          2018 
 Cash flows from operating activities 
 Cash generated by operations                             6,633         7,684 
 Net interest paid                                        (112)          (38) 
 Tax paid                                                 (246)         (601) 
                                                   ------------  ------------ 
 Net cash from operating activities                       6,275         7,045 
                                                   ------------  ------------ 
 
 Cash flows from investing activities 
 Acquisition of property, plant and equipment           (5,140)       (5,158) 
 Proceeds from disposal of subsidiary                     1,000             - 
 Net cash used in investing activities                  (4,140)       (5,158) 
                                                   ------------ 
 
 Cash flows from financing activities 
 Dividends paid                                           (738)         (899) 
 Repayment of term loan facility                              -         (375) 
                                                   ------------  ------------ 
 Net cash used in financing activities                    (738)       (1,274) 
                                                   ------------  ------------ 
 
 Net increase in cash and cash equivalents                1,397           613 
 Effect of exchange rate fluctuations on cash 
  held                                                  (2,842)            11 
 Cash and cash equivalents at beginning of 
  the period                                             11,187        12,756 
 Cash and cash equivalents at end of the period 
  (net of overdraft)                                      9,742        13,380 
-------------------------------------------------  ------------  ------------ 
 

Note: This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation (EU) No. 596/2014.

Cautionary Note Concerning Forward-Looking Information

Information and statements contained in this news release that are not historical facts are "forward-looking information" within the meaning of applicable securities legislation that involve risks and uncertainties relating, but not limited to Caledonia's current expectations, intentions, plans, and beliefs. Forward-looking information can often be identified by forward-looking words such as "anticipate", "believe", "expect", "goal", "plan", "target", "intend", "estimate", "could", "should", "may" and "will" or the negative of these terms or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Examples of forward-looking information in this news release include: production guidance, estimates of future/targeted production rates, and our plans and timing regarding further exploration and drilling and development. This forward-looking information is based, in part, on assumptions and factors that may change or prove to be incorrect, thus causing actual results, performance or achievements to be materially different from those expressed or implied by forward-looking information. Such factors and assumptions include, but are not limited to: failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, success of future exploration and drilling programs, reliability of drilling, sampling and assay data, assumptions regarding the representativeness of mineralization being inaccurate, success of planned metallurgical test-work, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors.

Security holders, potential security holders and other prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Such factors include, but are not limited to: risks relating to estimates of mineral reserves and mineral resources proving to be inaccurate, fluctuations in gold price, risks and hazards associated with the business of mineral exploration, development and mining, risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards, employee relations; relationships with and claims by local communities and indigenous populations; political risk; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining or maintaining necessary licenses and permits, diminishing quantities or grades of mineral reserves as mining occurs; global financial condition, the actual results of current exploration activities, changes to conclusions of economic evaluations, and changes in project parameters to deal with unanticipated economic or other factors, risks of increased capital and operating costs, environmental, safety or regulatory risks, expropriation, the Company's title to properties including ownership thereof, increased competition in the mining industry for properties, equipment, qualified personnel and their costs, risks relating to the uncertainty of timing of events including targeted production rate increase and currency fluctuations. Security holders, potential security holders and other prospective investors are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Caledonia undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.

[1] Non-IFRS measures such as "On-mine cost per ounce", "AISC" and "average realised gold price" are used throughout this announcement. Refer to Section 10 of the Quarter's MD&A for a discussion of non-IFRS measures.

[2] Gross profit is after deducting royalties, production costs and depreciation but before administrative expenses, other income, interest and finance charges and taxation.

[3] Adjusted EPS is a non-IFRS measure which aims to reflect Caledonia's ordinary trading performance. Refer to Section 10 of the Quarter's MD&A for a discussion of non-IFRS measures.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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May 14, 2019 02:00 ET (06:00 GMT)