Mr. Stefan Hayden reports
CALEDONIA MINING REPORTS RECORD HIGH Q3 2012 PRODUCTION AND GROSS PROFITS
Caledonia Mining Corp. is releasing its operating and financial results for the third quarter 2012, ended Sept. 30, 2012, which are reported below in Canadian dollars.
Gold produced at the Blanket mine in Zimbabwe in the third quarter reached a new all-time high of 12,918 ounces, 12 per cent higher than the 11,560 ounces produced
in the quarter ended June 30, 2012, and 33 per cent
higher than the 9,743 ounces produced in the third quarter of 2011.
Gold production from underground mining in the quarter was the highest
ever produced by Blanket since its first recorded production in 1906.
Blanket's cash operating costs in the quarter decreased to $508 (U.S.) per
ounce of gold produced, from $547 (U.S.) in the preceding quarter and $583
(U.S.) in the comparable quarter.
Gold sales during the quarter were at an average sales price of $1,673
(U.S.) per ounce, compared with an average sales price of $1,599 (U.S.) in the
preceding quarter and an average sales price of $1,737 (U.S.) in the
Gross profit for the quarter (after depreciation and amortization
but before administrative expenses and the indigenization-related
expenses referred to below) was $12,602,000, a new record high, which
was 25 per cent higher than the $10,067,000 achieved in the preceding quarter
and 35 per cent higher than the $9,364,000 achieved in the comparable quarter.
Cash flow from continuing operations in the quarter, before capital
investment, was $12,364,000, compared with $8,653,000 in the preceding
quarter and $9,206,000 in the comparable quarter.
Net cash and cash equivalents generated per share in the quarter was 1.2
cents, compared with 0.36 cent in the preceding quarter, and 2.9 cents for
the nine months to Sept. 30, 2012, compared with 1.14 cents for the
nine months to Sept. 30, 2011.
At Sept. 30, 2012, Caledonia had cash and cash equivalents of
$24,615,000, compared with $18,323,000 at June 30, 2012, and $6,847,000 at
Sept. 30, 2011.
Caledonia's annualized return on shareholders' funds (before the non-cash-based expenses arising from the implementation of indigenization
and non-cash adjustments arising from exchange rate movements on intercompany balances) was 61 per cent.
During the quarter, Blanket made payments in respect of direct and
indirect taxes, royalties, licence fees, levies and other payments to
the government of Zimbabwe totalling $8.4-million (U.S.), compared with $7.9-million (U.S.) in the preceding quarter and $3.8-million (U.S.) in the comparable
Nama base metals project, Zambia
The 2012 drilling program continued with the objectives of further
identifying and defining extensions of the mineralized zone identified
in 2011, and increasing the confidence level of the information on this
mineralized zone. As at Oct. 25, 2012, 30 holes and 8,400 metres of
drilling had been completed, and three rigs are currently working on the
To date, an area of copper mineralization has been defined as follows:
- Current identified strike length of 1.3 kilometres and a dip extent of 900
- Mineralization intersected at depths from 98 to 579 metres;
- Thickness of mineralized zone varies from 10 to 27 metres;
- Average copper grade of 0.52 per cent;
- Possible extensions of the mineralized zone to the west and to
depths below 580 metres will be drill tested in future.
The 2012 drilling program is expected to be completed shortly,
following which the drill results will be analyzed and interpreted.
Caledonia expects to issue an NI 43-101-compliant copper resource and
reserve statement by June 30, 2013.
Caledonia will continue to manage its cash resources so that it retains
the financial capacity to progress this project as fast and as far as
possible without requiring third party involvement or equity financing.
On Oct. 11, 2012, Caledonia announced the completion of the
indigenization of Blanket following which Caledonia now owns 49 per cent of
- Caledonia has received the certificate of compliance from the government
of Zimbabwe which confirms that Blanket is fully compliant with the
Indigenization and Economic Empowerment Act.
- Caledonia's strong operating performance was converted into an
attributable net loss after tax for the quarter of $7.24-million after a
non-cash, non-recurring charge of $14,161,000, due to the implementation
of the indigenization of Blanket.
As an indigenized entity, Blanket can now develop and implement its long-term growth strategy. The newly constituted Blanket board, which
includes representatives of the indigenous Zimbabwean shareholders, has
approved a capital investment program for 2013, and a four-year growth
strategy for 2014 to 2017. Work has commenced on a new development
project at Blanket (the No. 6 Winze project), which is expected to result
in a 70-per-cent increase in ore production from 2015. This program will be
financed from Blanket's internally generated cash and is expected to
result in progressive increases in gold production over the next five
Commenting on Caledonia's performance, Stefan Hayden, president and chief executive officer, said: "The third quarter of 2012 showed a substantial improvement in gold production at the Blanket mine in Zimbabwe. Gold production in the quarter was 12,918 ounces, 12 per cent higher than the preceding quarter and 33 per cent higher than the third quarter of 2011. This was the highest quarterly gold production ever achieved by Blanket mine since its first recorded production in 1906, and whose previous owners include Falconbridge and Kinross Gold.
"Increased gold production, further improvements in gold recoveries and continued close attention to costs contributed to a reduction in average operating costs from $547 (U.S.) per ounce of gold produced in the preceding quarter to $508 (U.S.) per ounce of gold produced. Blanket is now one of the lowest cost gold producers in both Africa and the world.
"The strong operating performance is a testament to the hard work of the management and employees at Blanket, and shows the benefits of Caledonia's investments in the Blanket mine.
"Following the implementation of indigenization, Blanket, as a highly profitable and cash-generative gold producer, and with Caledonia's financial, technical and administrative support, is well positioned to implement its growth strategy. Work continues at Blanket's satellite development properties, and on the deeper-level development and exploration at the Blanket mine. In addition, work has also commenced on a new development project at Blanket mine, the No. 6 Winze, which is expected to give rise to an approximate 70-per-cent progressive increase in production, commencing in three to four years.
"As expected, the implementation of indigenization at Blanket resulted in a large non-cash accounting charge which adversely affected our reported profit. This charge, which is a non-recurring item, had no impact on Caledonia's strong cash generation. Details of the highly complex accounting for indigenization is set out in the unaudited consolidated financial statements for the quarter, which are available on Caledonia's website.
"Work continues at the Nama base metals project in Zambia. I expect that Caledonia will be in a position to issue a resource and reserve statement by the end of June, 2013, as previously advised.
"Caledonia's financial position continues to improve. With almost $25-million of cash on hand, Caledonia has sufficient cash resources to invest in its existing projects and also in potential new opportunities."
Dr. Trevor Pearton, BSc, Eng (mining geology), PhD (geology), FGSSA, vice-president of exploration, is the company's qualified person as defined by NI 43-101. Dr. Pearton is responsible for the technical information provided in this release.
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