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Caledonia Mining Corporation: Results for the Fourth Quarter and Year ended December 31, 2014

2015-03-31 02:00 ET - News Release

TORONTO, ONTARIO -- (Marketwired) -- 03/31/15

Caledonia Mining Corporation (TSX: CAL)(OTCQX: CALVF)(AIM: CMCL) ("Caledonia" or the "Company") announces its operating and financial results for the fourth quarter ("Q4" or the "Quarter") and the year ended December 31, 2014 (the "Year"). All results are reported in Canadian dollars unless otherwise indicated. Following the implementation of indigenisation in September 2012, Caledonia owns 49 per cent of the Blanket Mine ("Blanket") in Zimbabwe. Caledonia continues to consolidate Blanket and the operational and financial information set out below is on a 100 per cent basis unless indicated otherwise.

Commenting on the results for 2014, Steve Curtis, Caledonia's CEO said:

"2014 was another challenging year due to the lower gold price and lower production. Despite the tough environment Caledonia still generated $3m of cash and paid $3.2 million in dividends to its shareholders after $6.8m was invested at the Blanket Mine. Blanket also achieved a creditable All-in Sustaining Cost of $969 per ounce of gold (2013: $973/oz) for the year albeit on 8.3% fewer ounces of gold production.

"Towards the end of 2014 Caledonia announced a revised investment plan under which approximately $70 million will be invested at the Blanket Mine over the next 7 years, with the objectives of doubling production and reducing costs. Implementation of the revised plan remains on track.

"In December 2014 the Company published a Preliminary Economic Assessment which confirmed the robust economics of the revised plan which has an internal rate of return of 267 per cent.

"Caledonia's cash generation in 2014 remained strong and Caledonia increased its net cash from C$23.4 million to C$26.8 million as at December 31, 2014.

"The commercial environment in Zimbabwe continues to show signs of improvement. In Q4 of 2014 the royalty rate payable to the Zimbabwe government was reduced from 7 per cent of turnover to 5 per cent. In early 2015 the discount payable on gold sales was reduced from 1.5 per cent to 1.25 per cent and the 2015 round of wage negotiations has been settled rapidly with an average increase agreed at 3 per cent."

Shareholder Conference Call

A presentation of the 2014 results and outlook for Caledonia is available on Caledonia's website (www.caledoniamining.com). Management will host a "Question and Answer" call at 10am Toronto time on April 2, 2014. Details for the call are as follows:

Date: April 2, 2015

Time: 10.00 Toronto/1500 London /1600 Johannesburg, Zurich, Frankfurt


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                      Dial-in telephone number    Password     PIN
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Canada Toll free      1 800 608 0547              Caledonia    5401477#
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USA toll free         1 866 966 5335              Caledonia    5401477#
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UK                    0808 109 0700               Caledonia    5401477#
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Other                 +44 20 3003 2666            Caledonia    5401477#
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Operating and Financial Review


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                Q4 2013  Q4 2014  Year 2013  Year 2014 Comment
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Gold produced    11,429   10,417    45,527     41,771  Gold production in
 (oz)                                                  2014 was adversely
                                                       affected by the lower
                                                       head grade.
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On-mine cost      666      704       613        652    On-mine costs for
 (US$/oz)(1)                                           2014 were higher than
                                                       2013 due to lower
                                                       sales which means
                                                       that on-mine fixed
                                                       costs are spread over
                                                       fewer ounces. On-mine
                                                       costs in Q4 of each
                                                       year are higher than
                                                       the annual average
                                                       due to the effect of
                                                       work-in-progress.
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All-in           1,196    1,118      973        969    AISC decreased in Q4
 Sustaining                                            and the Year due to
 Cost (US$/oz)                                         lower royalties,
 ("AISC")(1)                                           lower refining
                                                       charges, lower
                                                       community costs (for
                                                       the Year only) and
                                                       lower sustaining
                                                       capital investment
                                                       the combined effects
                                                       of which were reduced
                                                       by higher
                                                       administrative costs.
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Gold Sales (oz)  9,454    9,604     45,048     42,927  Sales in Q4 2014 were
                                                       higher than Q4 2013
                                                       despite lower
                                                       production due to the
                                                       lower level of work
                                                       in progress at
                                                       December 31, 2014.
                                                       Sales in 2014 were
                                                       lower than 2013 due
                                                       to lower production.
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Average          1,277    1,180     1,402      1,245   Lower realised gold
 realised gold                                         prices in Q4 2014 and
 price                                                 Year 2014 primarily
 (US$/oz)(1)                                           due to the lower gold
                                                       price.
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Gross profit      4.5      4.4       29.9       20.5   Lower gross profit in
 ($'m)(2)                                              2014 compared to 2013
                                                       mainly due to the
                                                       lower realised gold
                                                       prices and lower
                                                       production and sales.
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Net              (14.3)   (0.5)     (3.1)       4.9    Net loss in Q4 2013
 (loss)/profit                                         and the Year 2013 was
 attributable                                          after an impairment
 to                                                    charge of $14.2m in
 shareholders                                          respect of the Nama
 ($'m)                                                 project in Zambia.
                                                       Net loss in Q4 2014
                                                       was due to higher
                                                       general and
                                                       administrative
                                                       expenses and a high
                                                       tax charge in the
                                                       Quarter. Profit for
                                                       2014 was adversely
                                                       affected by lower
                                                       gold production and
                                                       the lower realised
                                                       gold price.
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Adjusted basic   (0.7)     1.6       27.6       12.1   Adjusted basic
 (loss)/earning                                        earnings per share
 s per share(3)                                        excludes impairment
 (cents)                                               charges, foreign
                                                       exchange profits or
                                                       losses,
                                                       indigenisation
                                                       expenses, deferred
                                                       taxation and tax
                                                       adjustments in
                                                       respect of prior
                                                       years and the costs
                                                       of the Zambian
                                                       operation.
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Cash and cash     25.2     26.8      25.2       26.8   Caledonia's cash is
 equivalents                                           held in Canadian, UK
 ($'m)                                                 and South African
                                                       banks.
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Cash from         2.8      2.2       14.7              Cash flow in Q4 and
 operating                                      13.7   the year were lower
 activities                                            due to the lower
 ($'m)                                                 realised gold price
                                                       and, for the year,
                                                       the lower number of
                                                       ounces sold the
                                                       effect of which was
                                                       reduced by lower tax
                                                       payments.
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Payments to the   3.6      2.6       19.5       12.4   Payments include
 community and                                         direct and indirect
 Zimbabwe                                              taxes, royalties,
 government                                            licence fees and
 ($'m)                                                 levies. The total of
                                                       such payments in 2014
                                                       was lower primarily
                                                       due to lower income
                                                       tax payable on the
                                                       reduced profit,
                                                       withholding tax and
                                                       reduced royalty
                                                       payments due to the
                                                       lower prevailing gold
                                                       price.
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(1) Non-IFRS measures such as "On-Mine Cost per ounce", "All-in Sustaining
Cost per ounce" and "average realised gold price" are used throughout this
document. Refer to Section 10 of the Company's published MD&A for a
discussion of non-IFRS measures.
( 2 ) Gross profit is after deducting royalties, production costs and
depreciation but before administrative expenses.
(3) Adjusted earnings per share ("EPS") is a non-IFRS measure which aims to
reflect Caledonia's ordinary trading performance. The adjusted EPS
calculation excludes any share based expense arising on the implementation
of indigenisation and the impairment and the foreign exchange profit, all of
which are included in the calculation of EPS under IFRS. Refer to Section 10
of the Company's published MD&A for a discussion of non-IFRS measures.

Dividend Policy and Shareholder Matters

On November 25, 2013 Caledonia announced a revised dividend policy in terms of which it intended to pay a dividend of 6 Canadian cents per share in 2014, split into 4 equal quarterly payments of 1.5 Canadian cents per share. The first quarterly dividend was paid on January 31, 2014 and subsequent quarterly dividends were paid at the end of April, July and October and at the end of January 2015. It is currently envisaged that the existing dividend policy of 6 cents per annum paid in equal quarterly instalments will be maintained in 2015. Caledonia will consider further dividends thereafter in the context of the prevailing commercial environment and expects to provide guidance for dividend payments in 2016 at about the time of the Q2 results, expected to be released in August 2015.

Strategy and Outlook

Caledonia's Board of Directors (the "Board") and Management have reviewed alternative expansion and diversification plans for Caledonia and have concluded the best returns on investment remain at the Blanket Mine in Zimbabwe, which continues to be cash generative in the current adverse market conditions and offers investment returns that exceed alternative opportunities.

On November 3, 2014, Caledonia announced its revised investment plan ("Revised Plan") and production projections for the Blanket Mine. The objectives of the Revised Plan are to improve the underground infrastructure and logistics and allow an efficient and sustainable production build-up. The infrastructure improvements will include the development of a "Tramming Loop" and the sinking of a new 6-meter diameter Central Shaft from surface to 1,080 meters.

The increased investment pursuant to the Revised Plan is expected to give rise to an increasing production profile that is expected to result in additional production from resources currently in the inferred category of approximately 70,000-75,000 ounces in 2021, this being in addition to projected production in 2021 from current mineral reserves of approximately 6,000 ounces. The Revised Plan is also expected to improve Blanket's long term operational efficiency, flexibility and sustainability.

An independent Preliminary Economic Assessment (the "PEA") and a revised supporting technical report dated December 1, 2014, entitled "A Technical Report on the Blanket Mine in the Gwanda Area, Zimbabwe" (the "Technical Report") relating to the Blanket Mine, with an effective date of December 1, 2014, was prepared in respect of the Revised Plan by Minxcon Consulting (Pty) Ltd. ("Minxcon"), in compliance with National Instrument 43-101 - Standards for Disclosure of Mineral Projects of the Canadian Securities Administrators ("NI 43-101") . The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is therefore no certainty that the PEA will be realized. The key conclusions arising from the PEA are as follows:


--  the Internal rate of Return arising from the Revised Plan was calculated
    at 267 per cent(4);
--  the Net Present Value for the Blanket Mine arising from reserves and the
    inferred resources used in the Revised Plan was calculated at US$147
    million(4); and
--  of the gold that will need to be produced, so that the cumulative cash
    flow arising from the Revised Plan becomes positive (i.e. the "Payback
    Area"), only 3 per cent will come from resources that are currently
    classified as inferred.

Implementation of the Revised Plan remains on plan. Progress on the implementation of each element which make up the Revised Plan is summarised below:


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Tramming Loop   - Total required development: 800m
                - Development completed at November 7, 2014: 16m
                - Development completed at January 31, 2015: 384m
                - Development completed at February 28, 2015: 450m
                - Target completion: June 2015
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No. 6 Winze     - Total sink (750m to 930m) - 180 meters
                - Sink as at January 31, 2015 - 120 meters
                - Sink as at February 28, 2015 - 140 meters
                - Target completion: July 2015
                - Initial production: January 2016
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Central Shaft   - Site clearance has been completed; pre-sink work has
               commenced
                - Sinking scheduled to commence July 2015
                - Winders have been purchased in early 2015 which are
               sufficient for the sinking and production phases.
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Management and Board changes

On November 18, 2014, Mr. Hayden stepped down as President and Chief Executive Officer and Mr. Steve Curtis was appointed as Caledonia's President and Chief Executive Officer ("CEO") in succession to Mr. Stefan Hayden.

Mr. Curtis, a Chartered Accountant with over 30 years' experience, was previously Caledonia's Chief Financial Officer ("CFO"). Mr. Curtis has been a key member of Caledonia's management team since he joined Caledonia in April 2006 and was elected to the Board in 2008.

Mr. Curtis will be supported in his role as President and CEO by Caledonia's existing management team which has been expanded over the last 15 months and comprises Mr. Dana Roets, the Chief Operating Officer, and Mr. Mark Learmonth the Chief Financial Officer and formerly Vice President, Investor Relations and Corporate Development.

Mr. Learmonth is a Chartered Accountant and had 15 years of investment banking experience in London and Johannesburg before joining Caledonia in 2008. On December 6, 2014, Mr. Stefan Hayden resigned as a non-executive director of Caledonia.


(4) IRR and NPV are derived using an assumed real gold price of US$1,250 per
ounce; NPV is calculated using a real discount rate of 8.36 per cent.
Further assumptions are set out in the Technical Report

The Consolidated Financial Statement for the year ended December 31, 2014 and the Management Discussion and Analysis for the quarter and year ended December 31, 2014 are available from the Company's website www.caledoniamining.com and from SEDAR.


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Consolidated Statements of Comprehensive Income
(In thousands of Canadian dollars except per share amounts)

                           For the 3 months         For the 12 months
                             ended Dec 31              ended Dec 31
                              2014      2013       2014      2013      2012
                                 $         $          $         $         $
Revenue                     12,972    12,114     59,082    65,113    75,221
Royalty                       (659)     (893)    (3,889)   (4,544)   (5,261)
Production costs            (7,082)   (5,919)   (30,812)  (27,412)  (25,653)
Depreciation                  (796)     (818)    (3,908)   (3,276)   (3,392)
                         ---------------------------------------------------
Gross profit                 4,435     4,484     20,473    29,881    40,915
Other (expense)/income         (29)        -         28         -         -
Administrative expenses     (2,796)   (2,067)    (8,157)   (7,772)   (4,055)
Share-based payment
 expense                         -       (68)         -       (68)  (14,569)
Indigenisation expenses
 (i)                             -         -          -         -    (1,700)
Foreign exchange
 gain/(loss)                   659     1,677      1,176     1,677        (4)
Impairment                    (196)  (14,203)      (196)  (14,203)     (330)
                         ---------------------------------------------------
Results from operating
 activities                  2,073   (10,177)    13,324     9,515    20,257
Net finance (cost)/income      (69)      102       (155)     (108)      (81)
                         ---------------------------------------------------
Profit before tax            2,004   (10,075)    13,169     9,407    20,176
Tax expense                 (2,320)   (4,279)    (6,604)   (9,897)  (12,818)
                         ---------------------------------------------------
Profit/(Loss) for the
 period                       (316)  (14,354)     6,565      (490)    7,358
                         ---------------------------------------------------

Other comprehensive
 income/(loss)
Items that are or may be
 reclassified to profit
 or loss
Foreign currency
 translation differences
 for foreign operations      1,440        38      3,848     2,254    (1,589)
Tax on other
 comprehensive income          122         -        122         -         -
                         ---------------------------------------------------
Other comprehensive
 income/(loss) net of
 income tax                  1,562        38      3,970     2,254    (1,589)
                         ---------------------------------------------------
Total comprehensive
 income/(loss) for the
 period                      1,246   (14,316)    10,535     1,764     5,769
                         ---------------------------------------------------

Profit/(Loss)
 attributable to:
Shareholders of the
 Company                      (480)  (14,436)     4,897    (3,055)    8,720
Non-controlling interests      164        82      1,668     2,565    (1,362)
                         ---------------------------------------------------
Profit/(Loss) for the
 period                       (316)  (14,354)     6,565      (490)    7,358
                         ---------------------------------------------------

Total comprehensive
 income/(loss)
 attributable to:
Shareholders of the
 Company                     1,064   (14,345)     8,833      (726)    7,112
Non-controlling interests      182        29      1,702     2,490    (1,343)
                         ---------------------------------------------------
Total comprehensive
 income/(loss) for the
 period                      1,246   (14,316)    10,535     1,764     5,769
                         ---------------------------------------------------

Earnings/(Loss) per share
 (cents)(iii)
Basic                         (1.1)    (27.7)       9.3      (6.1)     17.2
Diluted                       (1.1)    (27.7)       9.3      (6.1)     17.2
Adjusted earnings per
 share (cents) (ii)(iii)
Basic                          1.6      (0.5)      12.1      27.7      49.9
Diluted                        1.6      (0.5)      12.1      27.7      49.9
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i.  Expenses relating to the Zimbabwe indigenisation transaction were
    previously included in Administrative expenses. These expenses are now
    presented separately as they are relevant to the understanding of
    Caledonia's financial performance. The presentation of comparative
    figures has been aligned accordingly.
ii. EPS is a non-IFRS measure which aims to reflect Caledonia's ordinary
    trading performance. The adjusted EPS calculation excludes any share
    based expense arising on the implementation of indigenisation,
    impairments, tax adjustments in respect of prior years and foreign
    exchange profits and losses, all of which are included in the
    calculation of EPS under IFRS. Refer to Section 10 of the company's
    published MD&A for a discussion of non-IFRS measures
iii.The EPS for 2012 has been restated based on the 10:1 consolidation that
    took place in that year.

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Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
                                               For the 12 months ended Dec
                                                           31,
                                                   2014      2013      2012
                                                      $         $         $
Cash flows from operating activities
Cash generated by operating activities           18,822    22,768    41,420
Net interest paid                                  (118)     (108)      (81)
Tax paid                                         (4,999)   (7,974)  (11,618)
                                              ------------------------------
Net cash from operating activities               13,705    14,686    29,721

Cash flows from investing activities
Acquisition of Property, plant and equipment     (6,786)  (11,738)   (7,909)
Proceeds on sale of investment                        -         -        38
                                              ------------------------------
Net cash used in investing activities            (6,786)  (11,738)   (7,871)
                                              ------------------------------

Cash flows from financing activities
Advance dividends paid                                -    (1,987)   (3,739)
Dividends paid                                   (3,974)   (5,947)        -
Proceeds from the exercise of share options           -       470       974
                                              ------------------------------
Net cash used in financing activities            (3,974)   (7,464)   (2,765)
Net increase/(decrease) in cash and cash
 equivalents                                      2,945    (4,516)   19,085
Cash and cash equivalents at beginning of the
 year                                            23,426    27,942     9,256
Effect of exchange rate fluctuations on cash
 held                                               467         -      (399)
                                              ------------------------------
Cash and cash equivalents at year end            26,838    23,426    27,942
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Consolidated Statements of Financial Position
(In thousands of Canadian dollars)       As at   Dec 31,   Dec 31,   Dec 31,
                                                    2014      2013      2012
                                                       $         $         $
Total non-current assets                          40,388    33,448    36,533
Inventories                                        7,571     6,866     5,508
Prepayments                                          348       177       126
Income tax receivable                                111         -         -
Trade and other receivables                        2,040     3,889     1,718
Cash and cash equivalents                         26,838    25,222    27,942
                                              ------------------------------
Total assets                                      77,296    69,602    71,827
                                              ------------------------------
Total non-current liabilities                     12,980    10,094     6,928
Trade and other payables                           3,791     4,600     5,775
Zimbabwe advance dividend accrual                      -         -     1,987
Income taxes payable                               1,990     1,138     1,518
Bank overdraft                                         -     1,796         -
                                              ------------------------------
Total liabilities                                 18,761    17,628    16,208
                                              ------------------------------
Total equity                                      58,535    51,974    55,619
                                              ------------------------------
Total equity and liabilities                      77,296    69,602    71,827
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Contacts:
Caledonia Mining Corporation
Mark Learmonth
Tel: +27 11 447 2499
marklearmonth@caledoniamining.com

Blytheweigh
Tim Blythe/Halimah Hussain/Camilla Horsfall/
Megan Ray/George Yeomans
Tel: +44 20 7138 3204

Numis
JohnPrior/Paul Gillam/ James Black
Tel: +44 20 7260 1000

WH Ireland
Adrian Hadden/James Bavister
Tel: +44 20 7220 1751

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