Caledonia Mining (CMCL) Q4 2018 earnings summary

Executive summary

• 2018 gold production was 54,511 oz, down from 56,133 oz in 2017; lower grade drove reduced output and higher on-mine cost per ounce.

• Attributable profit rose 9% to $10.776m, while adjusted EPS declined 3% to 131.5 cents; the $6.7m export credit incentive supported earnings.

• Priorities are commissioning Central Shaft in 2020, lifting production capacity to 80,000 oz annually by end-2021, and growing free cash flow from 2021.

Financial highlights

• Revenue was $68.399m, down 2% YoY; gross profit fell 18% to $21.587m and EBITDA declined 21% to $19.193m.

• Operating profit increased 4% to $21.421m; profit after tax rose 16% to $13.756m and attributable profit increased 9% to $10.776m.

• IFRS EPS rose 15% to 98.9 cents; adjusted EPS fell 3% to 131.5 cents, reflecting adjustments including deferred tax and the provident fund liquidation gain.

• AISC fell 5% to $802/oz, benefiting from the higher export credit incentive; on-mine cost rose 9% to $690/oz as lower grades increased unit costs.

Outlook and guidance

• Central Shaft commissioning is planned for 2020; production is expected to reach ~75,000 oz in 2021 during ramp-up, with annual capacity of 80,000 oz thereafter.

• Medium-term targets include AISC of $700–$800/oz, declining capex after Central Shaft and increased free cash flow from 2021.

• Head grade is expected to rise toward the 3.72 g/t M&I resource grade; recovery is forecast to average 93.5% after a new oxygen plant is installed in late 2019.

• Longer-term plans include continued deep-level exploration beyond 2034 and evaluating Zimbabwe growth opportunities against minimum scale and per-share return criteria.