Caledonia Mining remains confident it will achieve its 2014 target of 48 000 ounces of gold at 49 percent owned Blanket Mine in Gwanda despite a 7 percent fall in first quarter output.
“Targeted gold production (at Blanket Mine) for 2014 is maintained at 48 000 ounces,” Caledonia said after first quarter output came in lower at 10 607 oz from 11 429 oz in 2013.
“A total of 10,607 ounces of gold were produced during Q1 2014 (10,472 ounces in Q1 2013), representing a 7,2 percent decrease on the gold produced in Q4 2013 (11,429 ounces).”
Gold production in the first quarter of 2014 was affected by the achieved grade being lower than the targeted grade of 3,83 g/t
This was due to a sub-horizontal fault encountered at the AR South ore body between 680 and 695 meters below surface, which had displaced the ore zone to the west and south.
Production on these panels was stopped and re-development was required to establish other panels at the required grade.
Management believes that the measures undertaken have been successful and that an average head grade of between 3,6 g/t to 3,83 g/t Au is expected to be maintained, with closer attention to be paid to grade quality in future.
Production was also adversely affected in February 2014 by an unstable mains power supply and by the unscheduled requirement to replace the winding rope on shaft 4.
“The first quarter is nearly always a poor production quarter”, Caledonia Mining spokesman Mark Learmonth said.
“But that’s been compounded by lower grades in one area,” he added remarks he made in international media this week.
The latest set of accounts though, show a net after-tax loss of 490 000 Canadian dollars, against profits last year of more than C$7,5 million largely weighed by one off cost items.
These included cobalt and copper exploration projects on which Caledonia spent money, but with little expected results. The firm has decided against committing more funds.
Revenue came in at C$63,4 million, some way down on the C$75 million booked in 2012, as the effects of the weaker gold price took their toll, but the real reason that the profit turned to loss was the C$14 million hit on a Zambian cobalt asset that had never quite delivered mineralisation on the
scale that Caledonia had been hoping for.
Associated with the write-off was another C$2,1 million deferred tax charge.
“It was non-cash,” said Mr Learmont, “and non-recurring.”
Further, accounting adjustments Caledonia also became liable for C$1,5 million in withholding taxes owed to the Government as a result of the company’s indigenisation deal.
During the period there was C$30 million receivable from the company’s indigenisation partners, and because that was distributed through the corporate chain the tax became liable.
Adding up all of those one-offs brought total exceptional items for the year up to C$14,3 million and the total tax bill to C$9,9 million, slightly more than the pre-tax profit of C$9,4 million.
Expansion plans to take production up to 76 000 ounces annually by 2016 are already in place, and the company has C$25 million capital reserve, which it is now looking to deploy.