BY MTHANDAZO NYONI
CALEDONIA Mining Corporation’s planned listing on the Victoria Falls Stock Exchange (VFEX) will offer local investors an opportunity to buy into a “fundamentally sound gold business” with a track record of strong management and sturdy corporate governance practices, Inter Horizon Securities (IH) has said.
The mining firm, which owns Blanket Gold Mine in Gwanda, recently issued a pre-listing statement relating to its secondary listing on the VFEX by way of introduction of Zimbabwean depository receipts (ZDR), each of which represents rights to a share that will be tradable on the bourse.
The depositary agent, according to IH, will issue an equivalent number of ZDRs against shares worth up to US$5 million at a price per ZDR of not less than US$12,50.
The transaction, IH said, is primarily driven by the need to benefit from incentives articulated by the Finance and Economic Development ministry.
Under prescribed conditions, mining companies listed on the VFEX will be entitled to 100% retention of their incremental mineral exports and new investments.
Caledonia through its mining asset, Blanket Mine, produced circa 58 000 ounces of gold in 2020 and is on target to produce between 65 000 and 67 000 ounces in 2021, which places the firm on track to earn the incentives announced by government.
From January to September this year, the mine produced 49 000 ounces.
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Researchers at IH, one of the country’s leading investment advisers, came out in full force behind the listing, saying the resources firm will benefit from a string of positive spin-offs from the listing.
“We believe this makes the business ideal for investors looking for United States dollar assets with a hard currency yield,” IH said.
Caledonia recently increased its quarterly dividend to US$0,14 per share, with its current dividend yield at 4,6%.
“We see growth being realised off the US$67 million capital expenditure outlay (initiated over the last five years).
“Deepening the Central Shaft driving (will bring) gold production to 80 000 ounces per year from 2022 onward,” the researchers said.
“Near term acquisitions within the gold industry motivated by the incentives articulated by the Ministry of Finance and Economic Development are on the cards, with Caledonia considering new assets like Maligreen Goldfields in Gweru.
“Blanket is a low-cost producer, gold prices have been reasonably firm and there is an imminent improvement in economies of scale mixed with greater foreign currency retention which bodes well for the business.”
On this basis, IH researchers said they were optimistic about the earnings trajectory.
“Downside risk is liquidity on the VFEX itself, which may potentially create an initial discount on valuation,” it added.
“We, however, believe this will resolve itself in the medium term as other assets migrate to the VFEX deepening the available asset base and attraction levels.”
