LEADING research firm Inter Horizon Securities (IH) has projected that revenue at the Victoria Falls Stock Exchange-listed Caledonia Mining Corporation will grow by 17% to US$171 million in the financial year 2024 (FY24) driven by high production and firming gold prices.
In the financial year 2023, Caledonia saw a revenue of US$146 million, up 3% on the prior period with US$5,70 million attributable to the Bilboes Oxides project.
Margins are expected to improve in the year, with earnings before interest, taxes, depreciation and amortisation (EBITDA) firming up to 43,3%
“Amid sustained global economic turmoil, gold prices have continued to rally—setting a record high of US$2 350 per ounce (oz) and also representing a 13% movement YTD [year-to-date],” researchers said in their analysis of Caledonia’s financial year 2023 (FY23) results.
Bloomberg consensus estimates have put prices to US$2 645 per oz by 2027, giving resilience to top line growth for gold producers. While Caledonia experienced significant setbacks in FY23, IH foresaw alleviation of some key issues in the current year.
“As per management reports, running costs at Bilboes subsequent to it being placed under care and maintenance have fallen from US$1 million per month to US$0,2 million,” it said.
“However, work on the much larger scale Bilboes Sulphides project is still ongoing in the background with the existing feasibility study now at an advanced stage.”
Indicative gold production at Blanket Mine for the year has been set at between 74 000 and 78 000 ounces at an on-mine cost.
- Cricket hero Raza draws inspiration from fighter-pilot background
- Trafigura seeks control of Zim metals over debts
- Cricket hero Raza draws inspiration from fighter-pilot background
- Caledonia profits up 16% after record production
Keep Reading
Electricity costs are notably expected to remain high in the short term then decrease as older less efficient infrastructure gets decommissioned.
“At an average gold price of US$2 226 per oz, we anticipate that Caledonia will register revenue of US$171 million in FY24. Margins are expected to improve in the year with EBITDA margin foreseen to firm up to 43,3%,” IH said.
“Capital expenditure for the year is budgeted at US$30,8 million. Negotiations for sale of the solar plant are at an advanced stage which will free up cash flows for core business lines.”
The researchers noted that Caledonia has traded a total value of US$0,48 million since its listing on the VFEX in 2021 given the limited liquidity on the dollar-denominated bourse.
It trades on average US$0,46 million per day on the NYSEAmerican.
“On this basis, we believe the correct reference market to be the NYSEAmerican and have concluded our valuation using the NYSEAmerican as the anchor market,” it said.
The year ended December 31, 2023 saw gold production at Blanket Mine register a 7,1% decrease year-on-year to 75 416 ounces. Tonnes milled saw a 2,4% increase to 770 440 tonne, however, this was offset by a lower average grade and gold recovery rate.
The fourth quarter of 2022 saw the commencement of work at Caledonia’s second asset, Bilboes, with operations centred on mining and processing oxides. The oxides project yielded 3 050oz of gold at an average grade of 1,13 gramme per tonne in the period under review.
However, operations were hindered by an unforeseen need of extensive waste stripping in the relevant areas and inaccurate mineralisation maps resulting in the project not meeting its expected output of between 12 500 per oz and 17 000 per oz.
As a result, Caledonia’s aggregate gold production for FY23 registered at 78 466 per oz, down 2,94% from the 80 775 per oz in FY22.
International gold prices firmed up within the year resulting in an average realised price of US$1 910 per oz versus the US$1 772 per oz registered in the same period last year. Production costs, however, outpaced growth of the topline, increasing 31% year-on-year to US$82,71 million.
Blanket Mine production costs grew 10,5% on account of electricity costs escalating 40% to US$13,50 million.
While the solar plant at Blanket Mine saw savings of US$38 per oz, the benefit of reduced use of diesel generators was outweighed by higher electricity consumption and maximum demand use charges, IH said.
The Bilboes operation incurred production costs of US$13,12 million before being put under care and maintenance in September 2023.
As a result, on-mine costs at the group level increased 22% to US$1 047 per oz while all-in-sustaining-costs surged 80% year-on-year to US$1 445 per oz on higher on-mine costs and a higher allocation to capital expenditure.
EBITDA margin decreased from 40,1% in FY22 to 24,63% in FY23 with the group towards capital expenditure needs and closed the year on a net cash position of -US$11,03 million.
