Caledonia Mining Corporation Plc has downgraded its production guidance for 2017 to about 57 000 ounces of gold from approximately 60 000 ounces.
As a result of the revised production guidance, earnings guidance for 2017 was also reduced from approximately 34 cents to between 24 and 31 cents per share, assuming a gold price of $1,275 per ounce for the remainder of 2017.
Caledonia is an exploration, development and mining company focused on Southern Africa and its primary asset is a 49 percent interest at Blanket Mine in Zimbabwe.
“Notwithstanding the improvements in underground tramming capacity that were completed in June 2016 and the two extra silos and the extra loop around 4 shaft which have been operational since the end of first quarter of 2017.
“Blanket has not been able to transport the volume of material that is necessary to achieve the target of 60 000 ounces of gold in 2017 while maintaining the rate of capital development that is necessary to achieve future production goals of 80 000 ounces per year by 2021,” said Caledonia in a statement yesterday.
The mining company said management has therefore concluded that, in the long term interests of the business, 2017 production tonnage target should be reduced so that the required development can be done, thereby safeguarding future production.
Caledonia said management continues to evaluate measures to improve underground tramming logistics in an effort to minimise the impact on 2017 production and will update the market as appropriate.
The mining company said revised production guidance has no effect on Blanket’s longer term production guidance of approximately 80 000 ounces by 2021.
The main factors in achieving the target of 80 000 ounces are the completion of the Central Shaft from surface to 1 080 metres below surface and development below 750m level. The Central Shaft has now reached the 750m level and is on schedule to be completed by the fourth quarter of 2018.
The revised production guidance reflects an increase of between 4 percent and 14 percent on the 50 351 ounces of gold produced in 2016.
The revised earnings guidance of 24 to 31 cents per share compares to adjusted earnings per share of 21,4 cents which was achieved in 2016.
“It is not expected that the revised production guidance will have any effect on Caledonia’s dividend, which is currently 1,375 US cents per quarter (5,5 cents per annum on an annualised basis) nor Blanket’s ability to generate sufficient funds to finance the completion of the Central Shaft project,” said the gold mining company.