TORONTO — Caledonia Mining has trimmed its forecast for gold production and earnings this year after a dip in grades at its Blanket mine in Matabeleland South, but vowed to maintain its dividend.
The miner produced 9 890 ounces in the three months to September, a near 12% decrease on the previous quarter as the head grade dipped below the first half’s 3,7 g/t.
Production so far in the nine months of the current year was 31 354 ounces, prompting Calendonia to reduce its full year target to 40 000 ounces from 45 000.
Gold production at Blanket has been adversely affected by lower than anticipated tonnages and grades being mined.
In recent months the grade has fallen further due to lower than anticipated grades at AR Main and AR South, which are the two largest tonnage contributors to Blanket’s run-of-mine production.
The financial performance of Blanket and Caledonia in the third quarter of 2014 was also adversely affected by the further decline in the gold price during the period under review.
It has been exacerbated by changes to the Zimbabwean taxation regime which dictates that the 7% gold royalty payable to the government is no longer allowable for the purposes of calculating income tax.
However, from October 1 this effect will be partially neutralised by a reduction in the gold royalty rate from 7% to 5%.
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“The effect of lower than anticipated production and the lower gold price has to some extent been mitigated by a reduction in the cost per tonne of ore processed, which has been achieved by a combination of oxygen injection into the CIL process, greater attention to cost control and the devaluation of the South African rand against the United States dollar,” Caledonia said in a statement.
Caledonia expects to release its results for the third quarter to September 30 2014 on November 13.
It is expected that the earnings per share for the quarter would be lower than earnings in previous quarters.
Earnings for the full year to December 31 will be materially lower than current market expectations.
However, Caledonia reiterated that due to its strong balance sheet, it expects to continue the existing dividend policy of 1,5 Canadian cents per quarter in 2015.
Caledonia is reviewing the medium term capital investment programme at Blanket with a view to improving grades and increasing tonnage throughput by facilitating more rapid access to deeper level resources.
The revised programme will be finalised in the fourth quarter of 2014.
– Proactive Investors/Caledonia
