Caledonia Mining Plc(CMCL) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The net profit attributable to shareholders increased by 800%, from approximately $2.6 million to $23.3 million, largely due to foreign exchange gains [17][18] - The average realized gold price remained stable, with a slight premium from the gold stabilization price mechanism introduced by the Zimbabwe government [16] - Cash from operating activities was strong, totaling $2 million for the quarter and $8.4 million for the half year, with cash at the end of the quarter just under $8 million [20][31] Business Line Data and Key Metrics Changes - Gold production in the quarter was slightly lower than expected, primarily due to lower grades and tonnage, but the production guidance for the full year was not significantly affected [12][34] - The all-in sustaining cost per ounce decreased by about 25%, from over $700 to $534, reflecting reduced operating costs and efficiencies [13][19] Market Data and Key Metrics Changes - The royalty rate for gold producers was adjusted to a tiered basis, with a 5% rate if gold prices are above $1,200, and 3% if below, which is a positive development for investment in the sector [22] - The Zimbabwe dollar's devaluation led to significant foreign exchange gains, impacting the financial results positively [18][25] Company Strategy and Development Direction - The medium-term strategy aims to complete the Central Shaft project by mid-2020 and ramp up production to 80,000 ounces of gold per annum by 2022, which is expected to significantly increase cash flows [3][4] - The company is exploring opportunities to expand its footprint as a gold producer in Zimbabwe, focusing on brownfield properties that have been largely ignored for the past 20 years [6][7] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operational environment in Zimbabwe, noting improvements in monetary and economic policies [38] - There are concerns regarding electricity supply stability, which has affected production, but efforts are being made to secure a more reliable power source [56][57] Other Important Information - The company plans to review its dividend policy as cash generation increases post-Central Shaft completion, with a current yield of about 4.6% [36] - The company has made significant investments in safety and operational efficiency initiatives, which are expected to enhance productivity [58][62] Q&A Session Summary Question: What are the expectations for production in the second half of the year? - Management indicated that production guidance was adjusted downwards due to severe interruptions in electricity supply and ongoing grade issues, but there is hope for improvement if conditions stabilize [34][42] Question: How is the company addressing safety and operational challenges? - The company has implemented a culture initiative focused on safe production, which has been positively received and is expected to improve morale and productivity [58][61]