Caledonia Mining posts record gold sales

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Caledonia Mining (LON:CMCL, TSE:CAL) finished the year on a high, posting record gold sales.

Its strong operational performance, coupled with a dip in cash costs, made for a profitable and very cash generative year.

Gross profit for the period jumped to US$40.91mln from US$29.11mln previously, although the pre-tax figure was almost static year-on-year after Caledonia made US$14.6mln of share based payments this time round.

The Zimbabwe-focused company ended the period in a very strong financial position with almost US$28mln of cash and equivalents.

After agreeing to pay a maiden dividend last year, the group said it will assess the pay-out policy “at least annually”.

However, Caledonia added that it wanted to maintain a strong financial position to implement its growth strategy and retain the flexibility to take advantage of “further opportunities” without the need for outside finance.

Output from the company’s Blanket gold mine was 45,465 ounces of the precious metal in the 12 months to December 31, which represented a 27% increase on the year earlier.

It achieved a price of US$1,666 an ounce, while cash costs came down 1.7% to US$571 an ounce. The plan is to lift output to 76,000 ounces of gold a year by 2016.

Chief executive Stefan Hayden said: “Exploration and development work is currently well underway at the first three satellites and I look forward to announcing the preliminary results of this work in due course.

“Importantly, the Blanket crushing and metallurgical plant has surplus capacity and any incremental ore from these satellites could be treated with modest additional capital investment.”

Separately, Hayden said Caledonia hopes to compile a NI 43-101-compliant copper resource this year for its Nama project in Zambia.

The shares were marginally higher at 8.15 pence in morning trade and are up 30% in the year to date.

Broker Canaccord believes there is headroom for the stock to double in value in the next year.

Reiterating his ‘buy’ advice, Dmitry Kalachev added: “Caledonia has proven track record of delivering results in a challenging environment and has the financial strength to finance growth internally.

“Strong balance sheet and cash generation leave ample room for further dividend growth.”