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Blanket Mine’s capital expenditure will increase due to investment in the ventral shaft

Business Reporter
Blanket Mine will spend about $15 million on capital projects this year, as initiatives to increase production gather momentum, Toronto Stock Exchange-listed shareholder Caledonia Mining Corporation has said.Caledonia, which has its major operations and revenue source in Zimbabwe, said in its 2014 financial results review that capex was projected at $15 million while the dividend policy had been put on hold in 2015.

“Capex (capital expenditure) will increase in 2015 due to investment in the Central Shaft eg $1,3 million spent on winders in February 2015.

“Anticipated capex in 2015 is approximately $16 million,” Caledonia said.

As such, the group stated: “At Blanket, dividends have been suspended for 2015 so that cash can be fully deployed into increased capital investment.”

Consequently, in 2015 Caledonia will not receive its 49 percent share of Blanket Mine quarterly dividends or repayments of facilitation  loans.

Caledonia said that Blanket Mine had opened discussions with Zimbabwean debt providers with a view to bring in greater funding flexibility.

The TSX-listed miner will continue to receive management fees from Blanket Mine and maintain modest margin on South African procurement.

At Caledonia, the company said its board remained committed to maintaining the Caledonia dividend, subject to the usual commercial judgments

Caledonia’s anticipates its cash position to be reduce in 2015, stabilise in 2016 and start to increase in 2017, as expansion starts bearing fruit.

Caledonia re-affirmed its 42 000oz output target for 2015 after commissioning a new compressor in February and resolving issues with Zesa equipment. It expects a better second half due to more production  days.

Caledonia announced a revised investment plan towards the end of 2014, under which about $70 million will be invested at Blanket Mine over seven years with a view to double gold production and reducing costs.

Caledonia said the royalty rate reduced from 7 percent to 5 percent starting October 1, 2014 while sole gold buyer Fidelity’s buying discount reduced from 1,5 to 1,25 percent effective February 2015.

The Canadian firm hailed the switch to selling gold to Fidelity Printers and Refineries for reducing working capital requirement due to rapid payment.

Further the company said that good relations with Government and relevant ministers showed their desire to support growth of the gold sector.

Caledonia has also noted increasing local debt capacity at lower pricing, despite the liquidity crisis and stable labour relations and electricity supply.

Blanket Mine’s gross profit for the year to December 2014 tumbled by 31,4 percent to $20,5 million on reduced output, due to lower head grade and weaker prices of gold on the global markets.

Gold output for the 12 months fell eight percent to 41 771 ounces from 45 527oz in 2013. Gold sales went down 4,2 percent to 41,927oz for the year.

Quarter-on-quarter, the company said production fell 8,8 percent to 10 419oz in the fourth quarter compared to the same period in the prior year. Profit also went down from $4,5 million in 2013 to $4,4 million in 2014.

Caledonia chief executive 2014, Mr Steve Curtis said 2014 was a challenging year because of the lower grade and reduced production levels.

In 2014, Caledonia still generated $3 million of cash and paid $3,2 million in dividends to shareholders after $6,8 million was invested in Blanket Mine.