Caledonia Mining Corporation plc (LON:CMCL) is the topic of conversation when WH Ireland’s Analyst Paul Smith caught up with DirectorsTalk for an exclusive interview.
Q1: Caledonia Mining Corporation today declared its usual quarterly dividend after deferring the decision at the start of the month. Do you think the timing on this is right?
A1: The timing of the dividend declaration, after the mine showed it could operate at nearly normal levels during the first lockdown, seems sensible. Caledonia has significant cash levels on its balance sheet ($14.1m at April 24th) so the quarterly dividend of ~$0.85m is well covered. With the mine beginning its push back to full capacity and the supply chains for key consumables and spares continuing to operate, the payment of the dividend appears assured.
Q2: How does the investment case for the Company look at the moment?
A2: The investment case for the company does not change. They have an expanding, low-cost gold mine which generates cash and funds the new Central Shaft expansion and a dividend of 30c/yr to shareholders (currently yielding 3.1%). A continuous dividend payer now for over 6 years (despite periods of instability in Zimbabwe and now the global Covid-19 pandemic) – we sometimes feel the perceived risk of investing in CMCL in Zimbabwe is overplayed.
Q3: What are you looking out for next in terms of news flow from the company?
A3: The next key milestone for us is the completion of the Central Shaft system, and the ability for Caledonia Mining Corporation to ramp up its output to over 80koz gold/yr, which is expected towards the end of this year; with full production reached a few years after. In the meantime we want to see more of the same from Caledonia – hitting its production targets and adding further amounts of cash to its balance sheet. The quality of the underlying asset – the Blanket mine – underpins the entire investment thesis.