Better than expected production contributed to a quarter-on-quarter improvement in profitability at Caledonia Mining(LON:CMCL, TSX:CAL) in the first three months of 2013.
Gold produced in the first quarter of 2013 at the Blanket mine in Zimbabwe was 10,472 ounces. This was ahead of the planned target but down on the 11,821 ounces produced in the final quarter of 2012, largely as a result of there being fewer working days in the first quarter because of Easter.
Gold production for the second quarter has started well, with production in April 2013 around 4,385 ounces.
Management believes that Blanket is on course to deliver its targeted production of 40,000 ounces for 2013.
Because the mine produced fewer ounces in the first quarter than in the preceding one, Blanket's cash operating cost per ounce of gold increased to US$669 from US$605 in the preceding quarter.
“As production increases from 2014 onwards, I expect that our average cost per ounce of gold produced should reduce somewhat,” ventured Stefan Hayden, who is Caledonia’s president and chief executive officer.
Gold sales in the quarter totalled 11,964 ounces at an average sales price of C$1,601 per ounce.
Net profit for the quarter improved to C$4.6mln from C$3.4mln in the final quarter of 2012. This led to an increase in earnings per share to 90 Canadian cents from 60 cents in the prior quarter.
At March 31, 2013 Caledonia had cash and cash equivalents of C$25.2 million, down from C$27.9 million at the beginning of the quarter.
The reduction in net cash was due to the payment by Caledonia of its initial dividend of C$2.5 million, working capital movements, high tax payments and capital investment.
“Supported by the company's strong cash position, development and exploration activity at Blanket continues at pace and we are moving towards achieving our targeted increase in production. Production is expected to increase to approximately 48,000 ounces in 2014 with further increases to the target of 76,000 ounces of gold from 2016 onwards.
“Exploration at Blanket's satellite projects also continues and we are encouraged by the results evaluated so far. Exploration work at GG continues to identify mineralisation and by the end of 2013 we hope to start transporting stockpiled ore from Mascot to Blanket for processing.
“As a low-cost producer with a robust balance sheet, Caledonia is well-positioned to continue to implement its growth strategy, notwithstanding the current volatility in the gold price," Hayden said.
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