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Caledonia Mining Corporation: Results for the Second Quarter and First Half of 2015

2015-08-13 02:00 ET - News Release

TORONTO, ONTARIO -- (Marketwired) -- 08/13/15

Caledonia Mining Corporation ("Caledonia" or the "Company") (TSX: CAL)(OTCQX: CALVF)(AIM: CMCL) announces its operating and financial results for the first half of 2015 ("H1" or the "Half Year") and the second quarter of 2015 ("Q2" or the "Quarter"). All results are reported in Canadian dollars unless otherwise indicated. Following the implementation of indigenisation in September 2012, Caledonia owns 49% of the Blanket Mine in Zimbabwe. Caledonia continues to consolidate Blanket and the operational and the financial information set out below is on a 100% basis unless otherwise indicated.

Operating and Financial Review


----------------------------------------------------------------------------
                     Q2      Q2      H1      H1
                   2014    2015    2014    2015  Comment
----------------------------------------------------------------------------
Gold produced    11,223  10,401  21,464  20,361  Gold production in the
 (oz.)                                           Quarter and half-year was
                                                 slightly ahead of target
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On Mine cash        611     729     622     699  Higher on mine cost per
 cost                                            ounce due to lower grade
 (US$/oz.)(1)                                    and increased electricity
                                                 consumption
----------------------------------------------------------------------------
All-in              878   1,030     890     984  Higher all-in sustaining
 sustaining                                      costs due to higher on-mine
 cost                                            cash costs
 (US$/oz.)(1)
----------------------------------------------------------------------------
Gold Sales       11,223  10,401  23,433  21,174  Sales in Q1 2015 include
 (oz.)                                           work in progress brought
                                                 forward from 2014 of 813
                                                 ounces compared to 1,969
                                                 ounces in Q1 of 2014
----------------------------------------------------------------------------
Average           1,265   1,174   1,267   1,187  Lower realised gold price
 realised gold                                   reflects the lower gold
 price                                           price
 (US$/oz.)(1)
----------------------------------------------------------------------------
Gross profit        5.6     4.0    11.7     8.6  Lower gross profit due to
 ($'m)(2)                                        fewer ounces sold, lower
                                                 gold price and higher on-
                                                 mine costs
----------------------------------------------------------------------------
Net profit          1.8     0.3     4.3     1.9  Net profit in Q2 of 2015 is
 attributable                                    after losses on
 to                                              discontinued operations in
 shareholders                                    Zambia
 ($'m)
----------------------------------------------------------------------------
Adjusted basic      3.7     2.3     7.8     5.2  Adjusted eps excludes
 earnings per                                    foreign exchange profits
 share(3)                                        and losses, deferred tax
 (cents)                                         and the expenses of the
                                                 Zambian office which has
                                                 now been closed
----------------------------------------------------------------------------
Cash and cash      25.8    23.7    25.8    23.7  Cash position remains
 equivalents                                     robust despite increased
 ($'m)                                           capital investment as part
                                                 of the plan to increase
                                                 production.
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Cash from           1.7     2.6     7.9     5.9  Robust cash generation
 operating                                       despite lower sales and
 activities                                      realised gold price due to
 ($'m)                                           reduced administrative
                                                 expenses and tax payments
----------------------------------------------------------------------------
Payments to the     3.6     1.8     6.6     3.6  Lower payments due to the
 community and                                   reduced royalty rate and
 Zimbabwe                                        the lower income tax
 government                                      payable on reduced profits
 ($'m)                                           and increased capital
                                                 investment.
----------------------------------------------------------------------------
(1) Non-IFRS measures such as "on-mine cash cost per ounce" "all-in
    sustaining cost per ounce" and "average realised gold price" are used
    throughout this document. Refer to Section 10 of this 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. Refer to Section 10 of
    the MD&A for a discussion of non-IFRS measures

Commenting on these results, Steve Curtis, Caledonia's President and Chief Executive Officer said:

"2015 is a very important year for Caledonia as we continue to implement the Revised Investment Plan, which we presented to investors in November last year. We are currently sinking, deepening or equipping four shafts at the Blanket mine in Zimbabwe and I expect this activity will translate into increased production from the first quarter of 2016.

"Caledonia's board and management believe that the implementation of the Revised Investment Plan remains in the best interests of shareholders: the successful implementation of the plan will result in a significant increase in Blanket's production and operating efficiency; the lower gold price increases the importance of delivering the Revised Investment Plan as scheduled. I am pleased to report that we have met all of our key milestones and we remain on target for achieving all of the future milestones.

"We have sharpened our focus on our core operation and we are streamlining our corporate structure by terminating dormant companies and non-core assets. Operationally, the management team is focused on implementing the Revised Investment Plan; accordingly, we have strengthened the technical team in Johannesburg, to ensure that we have the capacity to deliver all aspects of the Revised Investment Plan. The increased costs of the enlarged technical team have been met by cost reductions in other areas.

"On-mine cost control remains good but the average cost per ounce continues to be adversely affected by the lower achieved grades at the current production level. The achieved grade and tonnage production in the Quarter and in the Half Year were as planned.

"Subsequent to the end of the second quarter of 2015, the price of gold fell significantly. Blanket continues to operate profitably at the lower gold price and production and costs remain as planned. If the current gold price is sustained, however, investors should revise their expectations for Caledonia's future financial performance to reflect the prevailing environment. As production begins to increase from the first quarter of 2016, I expect that average costs per ounce will start to fall. I look forward to updating the market of our progress in due course."

Safety

Regrettably, an accident occurred on April 30, 2015 at the GG exploration project, as a result of which a contractor died. The Directors and Management of Caledonia and Blanket express their sincere condolences to the family and colleagues of the deceased.

Exploration

Exploration continues at Blanket Mine and at its satellite properties. On 19 May 2015, Caledonia announced a resource upgrade at Blanket Mine in which 491,000 tonnes of Inferred Resources were added to the Indicated Resource category, thereby enabling this material to be included in the life of mine plan. A further 47,000 tonnes of new inventory was added to Indicated Resource. Depending on actual production rates achieved, these resources may add 12 to 15 months life to the mine plan.

Dividend Policy

Since January 2014, Caledonia has paid a quarterly dividend of 1.5 Canadian cents per share per quarter, which amounts to a total dividend of 6 Canadian cents per annum. The first quarterly dividend was paid on January 31, 2014 and subsequent quarterly dividends were paid thereafter.

It is currently envisaged that the existing dividend policy will be maintained however, the Board remains attentive to further changes in market conditions.

Strategy

Caledonia's strategic focus is the implementation of the Revised Investment Plan at Blanket. Caledonia's board and management believe the successful implementation of the Revised Investment Plan is in the best interests of all stakeholders because it is expected to result in increased production, reduced operating costs and greater flexibility to undertake further exploration and development, thereby safeguarding Blanket's long term future.

Blanket will continue to explore and develop it satellite properties. Subject to the availability of funding, Blanket intends to construct a pilot plant to test material from the satellite properties so as not to compromise the existing high recovery rates which are achieved at Blanket's metallurgical plant.

The lower gold price may create further investment opportunities in Zimbabwe and elsewhere in Anglophone sub-Saharan Africa. Caledonia will continue to evaluate such opportunities as they arise.

Effect of the Lower Gold Price

In recent months the price of gold has fallen from over US$1,200 per ounce to below US$1,100 per ounce. The lower price of gold will, if sustained, reduce Blanket's cash generation. The implementation of the Revised Investment Plan at Blanket remains the prime focus for Caledonia and is expected to increase gold production, reduce the average cost of production and extend the life of mine by providing access to deeper levels for production and further exploration.

Caledonia has already implemented measures to reduce administrative expenses; the effects of which will be seen in coming quarters. Excluding the costs of the Zambian office, which was closed in the Quarter, the general and administrative expense in the Quarter was approximately US$1.4 million - 13% lower on an annualised basis than the expense for 2014. Caledonia's board and management remains closely attentive to any further weakening in the gold price.

Production and costs for the Quarter and the Half Year have been as planned. However, in light of the weaker gold price, investors should revise their expectations for Caledonia's future financial performance to reflect the prevailing environment.

The Financial Statements and the Management Discussion and Analysis for the Quarter and Half Year ended June 30, 2015 are available on www.caledoniamining.com and on www.sedar.com. A review of the results for the Quarter and Half Year and a video Q&A are also available for download for Caledonia's website

Cautionary Note Concerning Forward-Looking Information

Information and statements contained in this news release that are not historical facts are "forward-looking information" within the meaning of applicable securities legislation that involve risks and uncertainties relating, but not limited to Caledonia's current expectations, intentions, plans, and beliefs. Forward-looking information can often be identified by forward-looking words such as "anticipate", "believe", "expect", "goal", "plan", "target", "intend", "estimate", "could", "should", "may" and "will" or the negative of these terms or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Examples of forward-looking information in this news release include: production guidance, estimates of future/targeted production rates, and our plans and timing regarding further exploration and drilling and development. This forward-looking information is based, in part, on assumptions and factors that may change or prove to be incorrect, thus causing actual results, performance or achievements to be materially different from those expressed or implied by forward-looking information. Such factors and assumptions include, but are not limited to: failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, success of future exploration and drilling programs, reliability of drilling, sampling and assay data, assumptions regarding the representativeness of mineralization being inaccurate, success of planned metallurgical test-work, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors.

Potential shareholders and prospective investors should be aware that these statements are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Such factors include, but are not limited to: risks relating to estimates of mineral reserves and mineral resources proving to be inaccurate, fluctuations in gold price, risks and hazards associated with the business of mineral exploration, development and mining, risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards, employee relations; relationships with and claims by local communities and indigenous populations; political risk; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining or maintaining necessary licenses and permits, diminishing quantities or grades of mineral reserves as mining occurs; global financial condition, the actual results of current exploration activities, changes to conclusions of economic evaluations, and changes in project parameters to deal with unanticipated economic or other factors, risks of increased capital and operating costs, environmental, safety or regulatory risks, expropriation, the Company's title to properties including ownership thereof, increased competition in the mining industry for properties, equipment, qualified personnel and their costs, risks relating to the uncertainty of timing of events including targeted production rate increase and currency fluctuations. Shareholders are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Caledonia undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.


----------------------------------------------------------------------------
Condensed Consolidated Statement of Comprehensive Income (unaudited)
(In thousands of Canadian dollars except per share amounts)

                            For the 3 months           For the 6 months
                              ended June 30              ended June 30
                               2014         2015          2014         2015
                                  $            $             $            $
Revenue                      15,555       15,014        32,618       31,008
Royalty                      (1,090)        (752)       (2,285)      (1,553)
Production costs             (7,768)      (9,240)      (16,556)     (18,754)
Depreciation                 (1,025)      (1,025)       (2,083)      (2,063)
                        ----------------------------------------------------
Gross profit                  5,672        3,997        11,694        8,638
Administrative expenses      (1,760)      (2,323)       (3,607)      (4,342)
Foreign exchange
 (loss)/gain.                  (129)         139           128          764
Other income                      5           18             5           28
                        ----------------------------------------------------
Results from operating
 activities                   3,788        1,831         8,220        5,088
Finance (expense)/income        (29)         (43)          (70)         (87)
                        ----------------------------------------------------
Profit before income tax      3,759        1,788         8,150        5,001
Tax expense                  (1,237)      (1,212)       (2,537)      (2,411)
                        ----------------------------------------------------
Profit for the period         2,522          576         5,613        2,590
                        ----------------------------------------------------
Items that are or may be reclassified
 subsequently to profit or loss
Foreign currency
 translation differences
 for foreign operations      (2,288)      (1,730)         (154)       2,947
                        ----------------------------------------------------
Total comprehensive
 income for the period          234       (1,154)        5,459        5,537
                        ----------------------------------------------------
Earnings per share
 (cents)

Profit attributable to:
Shareholders of the
 Company                      1,840          324         4,265        1,878
Non-controlling
 interests                      682          252         1,348          712
                        ----------------------------------------------------
                              2,522          576         5,613        2,590
                        ----------------------------------------------------
Earnings per share
 (cents)
Basic                           3.5          0.5           8.2          3.4
Diluted                         3.4          0.5           8.0          3.3
Adjusted earnings per
 share (cents)(4 )
Basic                           3.7          2.3           7.8          5.2
----------------------------------------------------------------------------

(4) Adjusted earnings per share ("EPS") is a non-IFRS measure which aims to
 reflect Caledonia's ordinary trading performance. Refer to Section 10 of
 the MD&A for a discussion of non-IFRS measures


----------------------------------------------------------------------------
Condensed Consolidated Statement of Cash Flows (unaudited)
(In thousands of Canadian dollars)

                            For the 3 months            For the 6 months
                              ended June 30              ended June 30
                               2014         2015          2014         2015
Cash flows from
 operating activities
Cash generated by
 operating activities         3,528        2,928        10,396        6,750
Net Interest paid               (29)         (29)          (70)         (60)
Tax paid                     (1,841)        (268)       (2,441)        (788)
                        ----------------------------------------------------
Cash from operating
 activities                   1,658        2,631         7,885        5,902
                        ----------------------------------------------------

Cash flows from
 investing activities
Property, plant and
 equipment additions         (1,550)      (3,466)       (3,582)      (7,252)
Proceeds from sale of
 property plant and
 equipment                        -           57             -           58
                        ----------------------------------------------------
Net cash used in
 investing activities        (1,550)      (3,409)       (3,582)      (7,194)
                        ----------------------------------------------------

Cash flows from
 financing activities
Dividend paid                  (980)        (784)       (1,887)      (1,566)
                        ----------------------------------------------------
Net cash used in
 financing activities          (980)        (784)       (1,887)      (1,566)
                        ----------------------------------------------------
Net increase/(decrease)
 in cash and cash
 equivalents                   (872)      (1,562)        2,416       (2,858)
Cash and cash
 equivalents at
 beginning period           26, 714       26,094        23,426       26,838
Effect of exchange rate
 fluctuations on cash
 held                                       (849)                      (297)
                        ----------------------------------------------------
Cash and cash
 equivalents at end of
 period                      25,842       23,683        25,842       23,683
----------------------------------------------------------------------------


----------------------------------------------------------------------------
Condensed Consolidated statements of Financial Position (unaudited)
(In thousands of Canadian dollars)

                                           As at  December 31,     June 30,
                                                          2014         2015
                                                             $            $
Total non-current assets                                40,388       48,275
Inventories                                              7,571        8,180
Prepayments                                                348          317
Trade and other
 receivables                                             2,040        4,452
Income tax receivable                                      111            -
Cash and cash
 equivalents                                            26,838       23,683
                                                  --------------------------
Total assets                                            77,296       84,907
                                                  --------------------------
Non-current liabilities                                 12,980       15,418
Trade and other payables                                 3,791        5,089
Income taxes payable                                     1,990        1,894
                                                  --------------------------
Total liabilities                                       18,761       22,401
Equity attributable to
 shareholders                                           57,731       60,905
Non-controlling interest                                   804        1,601
                                                  --------------------------
Total equity                                            58,535       62,506
                                                  --------------------------
Total equity and
 liabilities                                            77,296       84,907
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Contacts:
Caledonia Mining Corporation
Mark Learmonth
+27 11 447 2499
marklearmonth@caledoniamining.com

WH Ireland
Adrian Hadden/Nick Prowting
+44 20 7220 1751

Blytheweigh
Tim Blythe/Halimah Hussain/Camilla
Horsfall
+44 20 7138 3204

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