Caledonia Mining looks to the future after surge in price of Gold
a lot of IG clients have been expressing
an interest recently in gold and how to
get exposure to the precious metal one
such way of doing it is to get into gold
mining companies those companies that
are producing gold and getting money
onto the balance sheet let’s catch up
now with one such business aim listed
calonia mining it’s a Zimbabwean focused
Mining Company it’s exploration
development as well as gold production
from its blanket mine it has a 64%
interest in that mine but 100% interest
in other gold mining claims in Zimbabwe
it’s recently said that first quarter
output this year was up 6% at 17,50 oun
of gold Mark limo is the chief executive
he joins us now Mark welcome and we’ve
spoken over the years about this
business and I’m pleased to see that
you’re expanding outside the blanket
mine I’ll get into that in just a minute
but I know that headwinds have been
building and um have perhaps maybe
comeing to a head in the first quarter
describe where we are in terms of
production at the moment and how things
going for the company well at the moment
things are going things are going very
well and when I say at the moment that
that kind of implies that um I don’t
expect that to continue so that that’s
that’s that’s incorrect things are
things are now are now going very well
as you’ve said um q1 production was what
17 177,000 ounces um higher than the
equivalent period in
2023 and also bang on Target in terms of
our own internal expectations but it’s
fair to say that whereas things have now
improved and the business the business
is now generating it’s producing it’s
producing gold is actually currently
producing slightly ahead of our
expectations clearly the gold price is
much stronger than we expected we’re now
seeing the um our costs beginning to
come down quite smartly and that’s in
very stark contrast to what was actually
quite a difficult year for us in 2023
when we had a disappointing production
from the uh the blanket mine which then
flowed through into disappoint cash
generation then on top of that um a
disappointment at um at a small scale um
oxide project which we’d hoped to um use
as a way of of of earning some um some
relatively small early cash flow at the
Bilbo’s mind so what we’re seeing now in
sort of early 2024 and you know moving
forward in 2024 is um the core
performance of the business has improved
uh substantially gone back to pretty
much where it was uh obious helped by
the um the higher gold price but I think
if I’m right in saying that the recent
release says an all sustaining cost has
almost doubled to
14 uh
1445 per ounce
$1,445 an ounce that seems to me like a
very high number compared to what it was
what’s going on it is it is it is it
does look relatively High um and I can
it really comes down to the to a couple
of issues first is that um we have seen
some some increase in our core online
cost probably about $100 an ounce um we
also saw um a an increase in the um our
GNA uh bill which was largely driven by
um waroff events in 2023 in particular
advisory fees relating to the
acquisition of um the bbos Bilbo’s asset
but the biggest the biggest effect that
we’ve seen pushing up the oilin
sustaining cost is an increase in um
sustaining capex um which previously was
very low and is now something like $400
an ounce and that is that is purely
because we commissioned a very large
Capital project at the blanket mine um
in early 2023 which means that and as we
continue to do further work on that
project so we’re doing further work on
the tailings facility we’re doing
further work on the Underground
development because that project is now
commissioned the capex on that further
work which was previously categorized as
expansion capex is now C categorized as
sustaining capex so the overall capex
bill hasn’t gone up it’s just been it’s
just moved from one pocket to the other
um and that’s why it seems to have quite
an alarming effect on our role in
sustaining cost those costs will come
down as we as we move forward as the as
the capex that we continuing to spend on
the tailings facility and the capex that
we’re continuing to spend on the
Underground development as that tails
off over future years but it does it
does look um rather worse than the
actual reality it’s an allocation issue
I I also know that over the years you’ve
been investing in uh new power sources
because Zimbabwe like a lot of African
countries has a problem in sustaining
power all the time to to businesses and
as I say Zimbabwe is no different from
most other countries um my understanding
is you’ve now got around about 25% of
your power at the blanket mine now
provided for you internally through
solar panels um which obviously is a
right sort of investment to make do you
intend to increase this can you increase
it to try and avoid the power outages
that you’ve had which cause all sorts of
problems for any business well again
that’s very inter question the the solar
project has worked very nicely for us um
whereas I think previously we were using
about 4 million liters of diesel a year
uh we reduce that to about um about a
million liters so clearly there’s
there’s there’s a cost saving there
because the cost of diesel generating
diesel generated power is about well 45
cents a kilowatt hour compared to one
for um for solar power so there’s been a
big benefit there um we in terms of our
our exposure to the grid yes the power
that we’re getting through the grid is
subject to um to um fluctuations in
terms of you know is it on is it off or
or in particular we have problems with
the the voltage but we can if needs be
if even if the grid sort of fails
completely we can fall back onto diesel
um so it’s not as though we’re at risk
of complete shutdown if the grid if the
grid fails but yes you’re quite right we
are now exploring um the option to add
another 10 megawatts maybe 10 maybe
eight to the existing um to the existing
facility which currently produces 14
with a view to further drisking us and
further benefiting from the from the the
cheaper solar power so yes that is
something that’s been nice for us it’s
been a good
investment talking about investment I
know you’ve been investing in your
Flagship asset the blanket mine as I
said you got a 64% interest um and I
know over the years you’ve been
expanding the mine you’ve been expanding
the LI the mine uh life length and so
forth uh what are your plans now from
this point on to continue to benefit
from what has been a very profitable
hole on the
ground yeah so we have as you we have
invested very heavily the blanket mine
over the last um seven or eight years
and we’ve we effectively constructed a
new mine underneath the old mine so the
old mine which had been running for over
100 years that extends down to a depth
of about 750 mters below surface what
we’ve done is we’ve now built a new mine
which extends from 750 mters down to
about 1.2 kilometers um we’ve also
restarted um exploration work which is
resulted in we put out a couple of press
releases over the last sort of year
eight months uh showing some really
quite good um exploration results that
will translate into a um a revised um
resource base and a revised life of mine
plan which we expect to publish um very
shortly so you will you will see the
benefit of that investment flowing
through in terms of more ounces and a
longer mind life in terms of the um of
converting the the new infrastructure
into a A continuing profitable organ
operation we do St even though it’s it’s
working and it’s making cash for us and
it’s it’s a nice business there’s
there’s more work we can do to optimize
that in terms of improving the reaping
the operational efficiencies that are
available from a a much bigger more
efficient um shaft that we have now
instead of the somewhat higgledy
piggledy infrastructure that we’ve been
working off over the last sort of um 15
years so still somewhat a work in
progress but we are we are over the hump
in terms of um quite high levels of
capex uh and we’re in a position where
we’ve got much more operational
flexibility um and clear we’ve found the
answers so that’s that’s been a good
investment yeah um is that investment
paying for all your other um interests
and and moving those ahead uh we’ve got
the recent um bbos acquisition of course
we’ve already referenced I believe
that’s an open cast Prospect and my
understanding is a feasibility studies
coming on that very shortly we’ve
got tarper and malig green as well are
you able to um uh sustain yourself
internally in terms of funding these
extra assets through from the income
from blanket or are you taking your
money from outside sources no we we have
used cash from blanket quite
aggressively to fund those strategic
developments outside blanket so you know
we bought bbos we we we paid for matapa
um in cash effectively we paid for um
Marley Green in cash um billbo is a much
bigger asset bbos has two and a half
million ounces at 2.3 grams a ton we
bought that for $65 million but that’s
clearly beyond our cash resources and in
any event I don’t think a cash deal
would have been um a cash deal certainly
wouldn’t have been on the table for us
because the vendors wouldn’t have sold
for a cash price at 65 million so we
funded the acquisition of um bbos using
using um Equity but then we’ve also used
um our own internally generated cash to
uh clean up the balance sheet which was
somewhat distressed and also to do some
of the early stage work so we’re not we
we’re using blankets cach to push the
projects forwards but in terms of
turning bbos to account that’s going to
be a very big project um targeting
170,000 ounces a year now there is
already a feasibility study on our
website which um shows a capital cost a
peak funding requirement of about $250
million so we we we expect that we can
fund a good proportion of that through
debt we also can make some contribution
using our internal cash resources and
the cash we expect to develop but
inevitably for a project of that size
there will be there will be some further
dilution either through public Equity
markets or will even consider uh looking
at things like introducing a joint
venture partner but the fundamental
approach that we adopt to this is to
fund it in a way that that maximizes the
npv uplift per share for calonia
shareholders we’re absolutely not
interested in tripling production and
tripling the number of shares in issue
because that just means that we’ve gone
to a lot of hard work to effectively
stand still so we are we are very
focused on uplift in npv per calonia sh
Ju Just just very quickly um from the
numbers you’ve said the billbo mine is
going to be on a part of the size of
blanket is that right or is it going to
be bigger than much bigger no much
bigger blanket blanket produces 80,000
ounces a
year Bill BOS will produce 170,000 ouns
a year so it’s more than twice the size
it’s very big and I think what is
genuinely exciting is you know we’ve got
we’ve got a bill BOS with a with an
existing resource base and a feasibility
study admittedly one that we’re updating
um but what we’ve also done is the Mater
asset that we bought as well that is
immediate mediately adjacent AB buts to
bbos there two halves of the same of the
same sort of group and whil and that is
that that we believe that has the
potential for being a much bigger more
attractive property than than Bilbo it
does need three or four years of
exploration work on it but we’re very
very excited that we’ve actually built a
portfolio of very attractive Assets in
Zimbabwe which creates a a trajectory of
growth for this business over the course
of the next sort of 10 years or so which
I think is outstanding yeah if me just
bring up a share price chart Mark we can
reference where we are in terms of the
movement this this chart goes back to
2015 so we got several years under our
belt here on the on the we we got this
high point we had back in July 2020 uh
at 1848 here we are now at 820 what’s
represented by this bearing in mind if I
were able to Overlay the gold price of
course we know where the gold price is
going um in an upward direction we don’t
seem to have got any benefit from the
shares because I guess yeah again that
okay there’s there’s quite a lot to say
about this chart the peak that you see
in the summer of 2020 that you’re
looking at there uh what’s the share are
you looking in dollars or stering what’s
the share price you see there this is
this is this is the London listed aim
listed shares okay so that would be less
than that would be about sort of 17
pound or something I’d guess I mean $27
is the is the number I’ve got in my head
that was when quite by surprise quite by
surprise calonia was included in
something called the Russell 3000 index
which typically is only available to us
companies now we’re not a US company
we’re a jersey registered company but
the bulk of our trading the vast
majority of our trading takes place on
the New York Stock Exchange and so we
were we were categorized as a US company
and we were quite surprisingly included
in that index that took us by surprise
but it also took the North American
Market by surprise and and forc and go
rise to quite a lot of um forced buying
as the as the um as the the passive
funds which track the Russell 3000 had
no choice they had to buy it and so at
that share price at that share price
that implied a discount rate to our
inter our own estimate of internal cash
flows a discount rate of 1% which
clearly clearly a 1% discount rate
whilst I’ll take it isn’t isn’t a
realistic um valuation discount rate for
a a single asset relatively Small Mine
in Zimbabwe so that that sh that that um
price there was somewhat um uh I’d say
overboard for reasons just outlined um
so the sh was not it was to be expected
the share price would come down from
that then I think the the relatively
poor performance we’ve seen um certainly
over the last um 12 months when the back
when the when the gold price has been
relatively strong I’m afraid is driven
by you know disappointing news flow in
respect of the core operations that
blanket mine which were frankly very
disappointing in the first half of last
year and a disappointing start to a
relatively to a small oxide operation at
bilbow that we’d hoped we could use as
as a as a quick way of scoring some some
early cash flow um so I think we’ve not
helped ourselves uh by the disappointing
news flow but as I as I think as we
started out we’re um confident now that
the operations at The Core Business have
improved there’s um good news flow
coming through in terms of uh production
profit credability uh resource
development and we’re making reasonable
progress in terms of um of of our
thinking about how we’re going to
commercialize the bbos project so you’re
quite right our share price has been
disappointing especially in the context
of the higher gold price yeah um so look
I know you’ve got no control over the
share price uh given what you just said
about the business where you expect the
profit to come in at in in future
quarters and so forth what is a
realistic price then you you say that
820 is undervaluing it but at the same
point that 1800 level a couple years ago
was overvaluing it at an overbought
price what do you consider to be a
reasonable price for shares you’re a
shareholder I I guess you’ve got a view
I I am a shareholder um i’ have thought
I thought as we are at the moment I mean
so the difficulty is the market doesn’t
have all the information that certainly
we have in our heads about where we
believe we can take the billbo project
and the job we’re going to have over the
course of of the coming months is to
convert the knowledge or the belief that
we have in our heads about what we can
do with bbos putting that expressing
that in a way that is is compatible with
our reporting obligations particularly
in North America which are quite onerous
so you ask me a very simple question the
answer the answer is a very difficult
answer because I’m answering on the back
of information that I know I know is not
in the market right but basically if you
were to if you were to take if you were
to take a four-year View and if you were
to believe that in four years time we’ve
got blanket producing 880,000 ounces of
gold a year we’ve got Bilbo producing
170,000 ounces of gold a year you if you
and if you pick a take an all-in
sustaining cost of say 12200 I’d hope
it’s lower than that pick your own gold
price you can work out quite easily yeah
what you think the annual cash
generation could be and then really the
question the question for people is then
to to put a factor on that as to what
they believe the risks the risks of us
achieving that are but it is it is it is
multiples not fractions of an increase
okay a not a clear answer I’m not
talking about it going up 20 25 30% I’m
talking about going up two three four
times because we we’re very very excited
about where we can take bbow yeah okay
to to a more realistic question now is
what should we be looking out for um
we’ve spoken about uh you’re moving
forward with a number of projects what’s
in your Inay as a matter of priority at
the
moment the priority is is to
demonstrably uh fix blankets performance
on a quar so that people can see quarter
by quarter is back to you know
generating you know 10 12 million doar
of cash flow a quarter um I think that’s
the core thing because that that’s
that’s the engine of the business and
hopefully we should begin to see that um
from from sort of miday when we when we
publish our our q1 results bearing in
mind that q1’s a relatively short
quarter for us um but that should build
as the year progresses we’ve already
indicated in our 2023 financial
statements which we published a few
weeks ago that there is a substantial
resource um update coming at blanket so
that will come through in um either late
April early May um and then really the
issue as I said earlier on the issue is
how do we how do we within the
constraints of our of our sort of
regulatory requirements convert the work
we’ve done so far on bbos into a format
that can be communicated to the market
in a way that is intelligible um that
may take that that conversion process
may take may take several months given
given the the work that needs to be done
on on sort of particularly the tailings
facility um but I think that’s the news
F you’d expect to see coming over the
course of certainly the next sort of six
months or so yeah uh just one final
question um how do you rate the London
Market at the moment you’re aim listed
you’re listed in New York youve clearly
got good exposure in New York as a as a
Russell listed company um we’ve been
hearing about some aim listed companies
getting fed up with London and moving
abroad or looking to move abroad any
discussions around the boardroom table
in that regard well we already are
abroad let’s be honest it’s not as aim
our so listing if aim was our sole
listing if aim was our sole listing I
think we would be looking to go
elsewhere um so aim our volume and aim
it’s a couple of thousand shares a day
uh it can easily in New York be 100,000
shares a day so price Discovery takes
place in New York um in terms of in
terms of access to equity and let’s face
it the whole for for a company like
ourselves markets like aim they’re not
casinos they’re they’re supposed to be
places where you be able to raise risk
Capital I’m afraid to say that um our
best Market by far for raising Equity
would be Believe It or Not Zimbabwe we’
found Zimbabwe in the um you might find
it hard to believe but Zimbabwe is a
much more fertile and deeper market for
equity for us than New York I’m afraid
London doesn’t come anywhere near either
of those markets so there’s no there’s
no there’s no need for us to discuss
terminating the listing there’s no need
for us to discuss going overseas we are
overseas but it is it is disappointing
to see that London is just becoming
increasingly um irrelevant I’m FR yeah
interesting comment Mark we happy to
leave you there but thanks indeed for
joining us it’s been a pleasure catch C
up with you again and looking into the
future to see where things are going
looking forward to catching up again
perhaps maybe sometime in the not too
distant future to get a look at where
things are going ask Mark lion he’s the
chief executive of calonia mining the
Zimbabwean based gold producer
[Music]
AIM and NY listed Caledonia Mining Corporation (CMCL) looks to improved times ahead as it organises its house to better benefit from the recent surge in the price of gold. One way to lever an improved return from gold is to invest in gold producers. CMCL is a Zimbabwean focused exploration, development and gold mining company. It owns a 64% stake in the Blanket Mine and 100% stakes in other gold mining claims mines in the area. It’s recently said that Q1 output this year was up 6% at 17,050 ounces of the precious metal. IGTV’s Jeremy Naylor caught up with CMCL chief executive Mark Learmonth to discuss the apparent mis-match between the company’s share price and the surge in gold. The discussion touches on the areas the company believes need to be addressed to steer a path back to better returns. The CEO also talks about its London listing, having been picked up in New York to represent part of the Russell 3000 index.s
#gold #trading #london
Subscribe ► https://www.youtube.com/IGUnitedKingdom?sub_confirmation=1
Learn how to trade with IG: https://upl.inc/the-world-of-ig
We provide fast and flexible access to over 17,000 financial markets – including indices, shares, forex and commodities – through our award-winning range of platforms and apps.
Established in 1974 as the world’s first financial spread betting firm, we’re the world’s No.1 provider of CFDs and spread betting* and a global leader in forex. We also offer an execution-only share dealing service in the UK, Ireland, Germany, Austria and the Netherlands.
Our range of affordable, fully managed investment portfolios rounds out our comprehensive offering to investors and active traders. Through our low fees and smart price-sourcing technology, we help traders keep their costs down.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider†. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit.
* Based on revenue excluding FX (published financial statements, February 2023).
† For the 12 months preceding 1 July 2023.