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Caledonia Mining Corporation Q&A: Record production in Q3 (LON:CMCL)

Caledonia Mining Corporation plc (LON:CMCL) Chief Financial Officer Mark Learmonth caught up with DirectorsTalk for an exclusive interview to discuss the record level of production in Q3, increased guidance, increased dividend and what to expect in terms of news flow going forward.

Q1: Now, you announced a record third quarter today. Mark, were there any particular factors that allowed you to achieve this result?

A1: Well, not really, no. It’s just a combination, for one everything went right, we got the tonnes, the tonnes where we expected, we got the grade, the grade is where we expected and we got the recovery. All those came to the happy confluence of a record production for the quarter of just over 15,000 ounces.

Q2: You also increased guidance from 55,000 to 58,000 ounces so a good year for Caledonia Mining Corporation. Are you expecting a strong fourth quarter?

A2: No, not really, that increased guidance just assumes that in quarter four, we’ll basically have a repeat of quarter three. So, for the nine months to the end of September we did about 43,000 ounces, if quarter four is about the same as quarter three, and typically quarter four tends to be better than quarter three anyway, it always has been for various reasons, so another 15,000 ounces, 43,000 plus 15,000 gives you 58,000 so the top end of that range. So, that’s why we felt it appropriate to increase the range.

Let’s face it, the increase, we’re not blowing through the previous guidance by many, many, many thousands, but I think the point is that in this in this environment where a lot of a lot of investors are still concerned about the effect of coronavirus, I think it’s beholden upon us to draw their attention to the fact that not only has coronavirus not had any appreciable effect on the mining operations, actually we’re doing better than we thought we would do.

So, that’s why it’s very significant for us to be in a position where we can announce this increased guidance.

Q3: Now, we also saw last week you increased the dividend to 10c a share, this is the third increase this year. Is this part of the management strategy to return money to shareholders now that the central shaft is nearly completed?

A3: Yes, and this should come as no surprise. For many years now, 5/6 years, we’ve had technical studies out there which demonstrate that when the central shaft is completed, our cash generation would increase very substantially. That’s because of higher production –  production will go up to about 80,000 ounces, lower costs – the all-in sustaining costs will fall to something between $700 and $800 an ounce and  then on top of that, we’ve got the following wind at the moment with the significantly higher gold price.

So, it should come as no surprise that we can see that our cash generation is going to improve but also consistently we’ve been saying that as the cash begins to improve, we got every intention of sharing that improvement with the shareholders by increasing the dividend.

So, again, it should come as no surprise that we have increased the dividend, there should be no doubt in people’s minds that as we go forwards, our cash generation will increase. So, putting those two together, again, people should be expecting a continuation of dividend increases with the provisor being that clearly, we don’t intend to distribute all of the increased cash.

Again, we’ve been very consistent about this, we do intend to somewhat grow our cash balance so that we’ve got the capacity to evaluate and investigate and, if necessary, push through with investment in new projects in Zimbabwe.

Q4: Finally, what other news flow can we expect from Caledonia Mining Corporation over the coming months?

A4: Well, clearly, it’ll be the Q3 results, the quarter three results will be published in mid-November. We’re hoping to provide some more context and granularity on the solar project which we were we’re about to embark on, there’s some contracts being finalised as we’re talking now. So hopefully there’ll be some news about that in the short term.

We continue to edge ever closer to getting our hands on some more assets in Zimbabwe, the process and the progress is very slow, largely for reasons beyond our control but we do feel increasingly confident that we edging our way towards getting our hands on more assets and we think that’ll be very exciting for the business. So, hopefully they’ll be some announcements on that in the coming months.

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