Caledonia Mining (AIM:CMCL) has upped its dividend for the first time since 2017 as it comes to the end of its major shaft-sinking project at the Blanket gold mine.
The multi-year expansion has cost around $20m (£15m) annually and its conclusion will free up a hefty amount of free cash flow for the company, especially with gold at over $1,500 an ounce (oz).
The new shaft cost has not been the only drag on Caledonia in recent months, however. The company has struggled with power supply this half but is now confident in the Zimbabwean government’s plan to keep the lights on, which has included miners paying for grid power up front to ensure enough can be brought in from South Africa, which has had its own energy crisis. Fellow exporter Mozambique is struggling as a regional drought has hit hydro capacity.
Caledonia has also upped its generator capacity so it keep running the mine when the grid supply fails.
Its quarterly dividend had sat at 6.875c since July 2017, when it was adjusted for a share consolidation, and will climb 9 per cent to 7.5c. CFO Mark Learmonth told Investors Chronicle this decision was “backward-looking” and came from the impending spending drop and confidence in the power supply as opposed to the incoming production increase from around 50,000oz a year to 75,000oz in 2021.
There is one more capital project in the works that could divert cash flow, however, although the solar plant plan would shore up the daytime energy supply in the long-term. Mr Learmonth said stage one would cost around $8m and floated “high-yield” debt finance as a funding option. The second stage, also $8m, would add to supply and allow the company to sell electricity back to the grid.
