Caledonia Mining Plc(CMCL) - 2024 Q1 - Quarterly Report

2023 Annual Results Overview 2023 Financial Summary In 2023, Caledonia's revenue increased by 3% to $146.3 million, driven by a higher average gold price. However, gross profit fell to $41.5 million from $61.8 million in 2022, and EBITDA decreased to $29.7 million from $50.4 million. This decline was primarily due to increased production costs at Blanket Mine, operating costs from the temporary Bilboes oxide mine, and several one-off expenses, including advisory fees and a settlement for the former COO. Consequently, adjusted EPS dropped significantly to 17.1 cents, and the company ended the year with a net cash deficit of $11.0 million Key Financial Metrics (2023 vs 2022) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Gross Revenue | $146.3 million | $142.1 million | | Gross Profit | $41.5 million | $61.8 million | | EBITDA | $29.7 million | $50.4 million | | Adjusted EPS | 17.1 cents | 219.9 cents | | Net Cash from Operating Activities | $14.8 million | $42.6 million | | Net Cash and Cash Equivalents | $(11.0) million | $1.5 million | - The decrease in profitability was largely attributed to higher production costs at Blanket ($69.6M), operating costs at the Bilboes oxide mine ($13.1M), and a 46% increase in administrative expenses due to one-off payments[36][29] - On-mine cost per ounce rose to $1,047 from $735 in 2022. Excluding the temporary Bilboes oxide mine, the cost was $912 per ounce, with the increase driven by higher labor and electricity costs[36] - All-in sustaining cost (AISC) per ounce increased by 64.6% to $1,445, up from $878 in 2022, reflecting higher on-mine costs and sustaining capital expenditure[36] Operating Highlights Caledonia achieved its 2023 production guidance with 75,416 ounces of gold produced at Blanket Mine. The company has set a production target of 74,000 to 78,000 ounces for 2024. Deep-level drilling at Blanket continues to yield encouraging results, suggesting potential for an increased life of mine, with a revised mineral resource statement expected in Q2 2024. A notable operational event was 3,057 ounces of gold being held as work-in-progress at year-end, which were sold in early January 2024 - Annual gold production at Blanket Mine was 75,416 ounces in 2023, which was in line with guidance[26][37] - The 2024 gold production guidance for Blanket is set at 74,000 to 78,000 ounces[37][53] - Deep-level drilling results at Blanket's Eroica and AR South ore bodies indicate better grades and widths than previously expected, with a revised resource statement anticipated in Q2 2024[25][31][37] - Gold sales in Q4 excluded 3,057 ounces held as work-in-progress at year-end, which were subsequently sold in early January 2024[26][37][40] CEO Commentary and Strategic Outlook The CEO expressed confidence in Blanket Mine as the foundation for growth, despite one-off costs impacting 2023 profitability. The company is actively addressing high labor and power costs. The core strategy is to evolve into a multi-asset, Zimbabwe-focused gold producer, aiming for over 250,000 ounces per annum. Immediate priorities for 2024 include meeting production targets at Blanket, extending its mine life, completing a revised feasibility study for the Bilboes project to optimize capital, and continuing exploration at Motapa - The company's vision is to become a multi-asset, Zimbabwe-focused gold producer with an ambition to produce over 250,000 ounces of gold per annum[41] - Management has taken steps to address higher than expected labor and power costs and is evaluating measures to reduce electricity consumption and improve labor efficiency[40][44][45] - Strategic focus for 2024 includes: producing 74,000-78,000 oz at Blanket, extending Blanket's life of mine, completing the updated Bilboes feasibility study, and continuing exploration at Motapa[53] - A quarterly dividend of 14 cents per share was declared, reflecting management's confidence in the business operations[24][51] Operational Review and Projects Blanket Mine Operations Blanket Mine's performance remains robust, forming the core of the company's strategy. However, operations in 2023 faced challenges from high electricity and labor costs. The poor quality of grid power is a significant production risk, prompting investigations into alternative power solutions and efficiency measures. Management is transitioning mining activities to be serviced by the new Central Shaft to reduce costs and improve efficiency. An ongoing underground drilling program has yielded positive results, suggesting an extension to the mine's life - The poor quality of electricity supply from the Zimbabwe grid is the most significant production risk. Management is investigating options to stabilize supply and reduce diesel generator usage[28] - Production costs increased due to high electricity usage from older shafts. The mine is transitioning to the new Central Shaft, which is expected to reduce power consumption in 2024 and 2025[27][44] - Labor force management improved in late 2023, significantly reducing overtime costs, with these efficiencies expected to continue[45] - Total drilling for 2023 was 13,280 meters. Results from the Blanket, Eroica, and AR South ore bodies are expected to be reflected in a revised resource statement in Q2 2024[23][31] Bilboes Project Development The small-scale Bilboes oxide mining operation was placed on care and maintenance from October 1, 2023, due to incurring losses. This move reduced monthly costs at the site from approximately $1 million to $200,000. Work on a revised feasibility study for the large-scale sulphide project is well-advanced. The company is focused on reducing the initial capital expenditure and optimizing project economics to maximize shareholder value - The Bilboes oxide mine was returned to care and maintenance effective October 1, 2023, due to operating at a loss[36][47] - Monthly costs at Bilboes were reduced from ~$1 million to ~$200,000 after transitioning to care and maintenance[47] - A revised feasibility study for the large-scale Bilboes sulphide project is in progress, with a focus on reducing initial capital expenditure to enhance project economics[26][32][48] Consolidated Financial Statements Consolidated Statement of Profit or Loss For the year ended December 31, 2023, the company reported revenue of $146.3 million, a slight increase from $142.1 million in 2022. However, gross profit declined significantly to $41.5 million from $61.8 million, and operating profit fell to $15.2 million from $40.3 million. The company recorded a net loss for the period of $618,000, a sharp reversal from a net profit of $22.9 million in 2022. This resulted in a basic loss per share of $0.24, compared to earnings per share of $1.36 in the prior year Consolidated Statement of Profit or Loss (in thousands of USD) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenue | 146,314 | 142,082 | 121,329 | | Production costs | (82,709) | (62,998) | (53,126) | | Gross profit | 41,482 | 61,819 | 54,074 | | Administrative expenses | (17,429) | (11,941) | (9,091) | | Operating profit | 15,177 | 40,276 | 38,360 | | Profit before tax | 12,192 | 39,636 | 37,999 | | (Loss) profit for the period | (618) | 22,866 | 23,142 | | Basic (loss) earnings per share ($) | (0.24) | 1.36 | 1.49 | Consolidated Statement of Cash Flows Net cash inflow from operating activities decreased substantially to $14.8 million in 2023 from $42.6 million in 2022. Cash used in investing activities was $31.2 million, primarily for property, plant, and equipment. Financing activities provided a net cash inflow of $3.9 million, largely due to a share issuance of $15.6 million, which was offset by dividend payments ($11.1 million) and loan note repayments ($7.3 million). Overall, the company experienced a net decrease in cash and cash equivalents of $12.5 million, ending the year with a negative cash position of $11.0 million Consolidated Statement of Cash Flows (in thousands of USD) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash inflow from operating activities | 14,769 | 42,616 | 30,903 | | Net cash used in investing activities | (31,161) | (44,329) | (35,715) | | Net cash from/(used in) financing activities | 3,931 | (12,754) | 2,164 | | Net decrease in cash and cash equivalents | (12,461) | (14,467) | (2,648) | | Net cash and cash equivalents at end of year | (11,032) | 1,496 | 16,265 | Consolidated Statement of Financial Position As of December 31, 2023, total assets increased to $328.3 million from $235.2 million in 2022, mainly due to a significant rise in non-current exploration and evaluation assets to $94.3 million. Total liabilities also grew to $64.1 million from $41.7 million. Total equity increased to $264.2 million from $193.5 million, bolstered by a substantial increase in share capital to $165.1 million Consolidated Statement of Financial Position (in thousands of USD) | Account | As at Dec 31, 2023 | As at Dec 31, 2022 | | :--- | :--- | :--- | | Total non-current assets | 274,074 | 196,764 | | Total current assets | 54,229 | 38,427 | | Total assets | 328,303 | 235,191 | | Total equity | 264,192 | 193,459 | | Total liabilities | 64,111 | 41,732 | | Total equity and liabilities | 328,303 | 235,191 | Other Information Dividend Declaration and Conference Call Caledonia has declared a quarterly dividend of 14 U.S. cents per share, payable on April 26, 2024, signaling continued confidence in its operational cash generation. Management will host a conference call and webinar on April 3, 2024, at 2:00 PM London time to discuss the 2023 financial results - The company declared a quarterly dividend of 14 U.S. cents per share[24][51] - A conference call for shareholders to discuss the results is scheduled for April 3, 2024, at 2:00 PM London time[49][50] Cautionary Note Concerning Forward-Looking Information This report contains forward-looking statements regarding the company's expectations, plans, and beliefs, including production guidance, exploration plans, and the development of the Bilboes project. These statements are subject to numerous known and unknown risks and uncertainties. Factors such as commodity price fluctuations, inaccuracies in mineral reserve estimates, political risk, operational hazards, and changes in economic conditions could cause actual results to differ materially from those projected. Investors are cautioned not to place undue reliance on this information - The news release contains forward-looking information, including production guidance, future exploration plans, and the development of Bilboes[3][17] - These statements are subject to significant risks and uncertainties, such as fluctuating gold prices, inaccurate mineral resource estimates, political risks, and operational hazards[4] - The company undertakes no obligation to update forward-looking information, except as required by law[4]