CALEDONIA Mining Corporation says it is reviewing Blanket Mine’s medium-term investment programme to mitigate lower gold prices and the increased tax burden in Zimbabwe.
The Toronto Stock Exchange-listed gold producer posted pre-tax profits of C$12,9 million for the six months to the end of June — up from C$8,1m last time, according to a statement released yesterday.
Revenues rose to $36,4m from $32,6m and gross profits increased to $17,7m from $11,7m.
Blanket Mine, in Matabeleland South, is one of Caledonia’s biggest operations in Zimbabwe.
The company said new sales arrangements where miners were expected to sell their gold to Fidelity Printers and Rifeners had affected Blanket Mine’s working capital.
Gold production fell to 21 464 ounces in the period — down from 22 060 ounces during the first quarter.
Caledonia said production in the second quarter was adversely affected by lower head grade and lower tonnage throughput.
“In light of the lower gold price, slightly lower than anticipated production and the increased taxation burden in Zimbabwe, Blanket and Caledonia are reviewing Blanket’s medium-term investment programme with a view to optimising Blanket’s future profitability and cash generation,” Caledonia president and chief executive Stefan Hayden said in a statement.
“The new sales arrangements with Fidelity have reduced Blanket’s working capital requirement due to the earlier payment terms.”
Hayden said Blanket had received all payments due from Fidelity in full and on time.
He said Caledonia was now beginning to see the fruits of ongoing exploration activity at Blanket Mine.
“Based on recent drilling, a further 500 000 tonnes at 3,9g per tonne has been identified which, as expected, appears to be a continuation of the Blanket Ore bodies and is the area that is being addressed by the No 6 Winze Project,” Hayden said.
“The nature of the ore bodies at Blanket and the satellites dictates that exploration is best done from underground drill cubbys rather than surface drilling.
“It takes a significant amount of time to complete the underground development and cross-cuts out to the required drilling points.
“This work has been in progress for several quarters and I expect that it will result in further increases in resources.”
He said the first half of the year had presented serious challenges for the Canadian miner.
“The quarter and first half year of 2014 presented significant challenges as a result of the continued low grades which adversely affected gold production,” he said.
“New production areas have and are being developed to replace those areas where production has been suspended due to the lower grade.
“I am confident that the 2014 production target of 45 000 ounces will be achieved.
“Management interventions to improve grade control resulted in some improvement in Q2 from the previous quarter, but it is likely that the achieved grade in future quarters will continue to be at or slightly lower than the level that was achieved in Q2.”